What if Your Income Is Too High for Chapter 7 but Your Debt Is Too High for Chapter 13?

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For individual debtors, Chapter 7 and Chapter 13 are the most common personal bankruptcy filings in Georgia and likely in every other state as well. Both types have certain eligibility requirements, and in some cases, people may not qualify for either.

Chapter 7 eligibility requires petitioners to pass a means test that considers their income in relation to the average household income for their area. Chapter 13 eligibility requires petitioners to have regular income, and their secured and unsecured debts must fall below a certain level. Therefore, an individual with very high income and very high debt may not qualify for either program.

While Chapter 11 bankruptcy is more commonly associated with businesses, it is technically an option for individuals:

  •     Non-business Chapter 11 filings are fairly rare. Between March 2012 and March 2013, there were only 1,398 in the United States and only 17 in Georgia.
  •     Chapter 11 is perhaps the most complex type of common bankruptcy and has the potential to take the longest. It should usually be avoided for individuals if other options remain open.
  •     Chapter 11 requires a great deal of cooperation from creditors, while the court and the trustee usually keep creditors in check in Chapter 7 and Chapter 13.

Chapter 11 for individuals is sometimes a possibility, but it’s only beneficial in a very narrow set of circumstances.