Average Income

• In Chapter 7, a court-appointed trustee will use your assets and cash to pay off your creditors, after which the court will discharge, or wipe out, your debts. If you have no assets or they're exempt under federal or state law, you only have to pay debts that survive bankruptcy, such as child support. To qualify for Chapter 7, your average income for the six months before filing must be below your state median. If it's above the median, the court will assume you can repay a substantial portion of your debts.
  
  

Means Test

• If your income is too high for Chapter 7, you can still qualify by taking a means test. The test adjusts your income for living expenses in your region---not what you actually spend on clothes, food and shelter but what the government considers reasonable costs. If your adjusted income passes the test, you can file Chapter 7; otherwise, the court will assume you're trying to abuse the system by avoiding debts when you have the money to pay them (see Resources).
  
  

Chapter 13

• In Chapter 13, you keep your assets but devote all of your disposable income for three or five years---three years if you make less than the state median---to paying your creditors. Disposable income is what's left after subtracting "reasonable" living expenses, charitable donations and payments on your mortgage, child support and other debts that survive bankruptcy. Depending on your income, expenses and the amount of your debt, your "substantial portion" equals a fraction of what you owe, or almost all of it.
  
  

Presumption of Abuse

• Even if you meet the income tests, courts can reject your filing if the "totality of circumstances" show that you could repay your creditors more than you will in Chapter 7. If you've deliberately avoided work or stayed on unemployment to keep your income down, that would count as abuse; so could making expensive pleasure purchases in the months before you file instead of paying your creditors. If the court rules against you, you'll have to convert to Chapter 13 if you want a bankruptcy discharge.