I earn six figures. Can I still file bankruptcy?

Key Takeaways

• Yes, six-figure earners can absolutely file for bankruptcy. High income doesn't automatically disqualify you, especially if you have significant debt or high expenses.
• The Means Test is crucial. This test determines if you qualify for Chapter 7 or if Chapter 13 is a more appropriate solution for your financial situation.
• High expenses can offset high income. Medical bills, mortgage payments, and other necessary living costs play a significant role in bankruptcy eligibility.
• Expert legal guidance is essential. A qualified bankruptcy attorney can navigate the complexities of your financial situation and determine the best path forward. Find a bankruptcy attorney at /attorneys.

Can someone earning six figures file bankruptcy?

Yes, even if you earn a six-figure income, you can absolutely file for bankruptcy. The notion that bankruptcy is only for low-income individuals is a common misconception. While a higher income does introduce additional complexities and scrutiny, particularly regarding the Means Test, it does not automatically disqualify you from seeking debt relief through bankruptcy. Many factors beyond gross income, such as the amount and type of debt, household size, and essential living expenses, play a critical role in determining eligibility for Chapter 7 or Chapter 13 bankruptcy. Your ability to file will depend on a comprehensive evaluation of your financial picture.

Understanding bankruptcy for high-income earners

The primary goal of bankruptcy is to provide a fresh financial start for individuals overwhelmed by debt. This relief is not exclusively reserved for those with minimal income. In fact, individuals with substantial incomes often accumulate significant debt due to various life circumstances.

• Medical emergencies
• Business failures
• Job loss
• Divorce
• Poor financial management or unexpected expenses

For many, the idea of bankruptcy carries a stigma, especially for those who have historically earned a good living. However, it's a legal process designed to help, not punish. With total household debt in the U.S. reaching $18.8 trillion, and a significant percentage of bankruptcy filings citing income decline (78%) or medical issues (65%) as contributing factors, it's clear that financial distress can impact anyone, regardless of their earning potential. The total number of bankruptcy filings in 2025 is projected to be around 574,314, demonstrating the widespread need for this legal relief.

The Means Test: Your gateway to Chapter 7

The most significant hurdle for six-figure earners seeking bankruptcy, particularly Chapter 7, is the Means Test. This test was introduced with the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) of 2005 to prevent higher-income individuals from filing for Chapter 7 when they could realistically repay some of their debts through a Chapter 13 plan.

Overview of the Means Test

• The Means Test is a two-part calculation used to determine eligibility for Chapter 7.
• It compares current monthly income to state median income and then calculates disposable income after allowed expenses.
• Even high earners may pass the Means Test if allowed expenses reduce their disposable income sufficiently.

Part 1: Income comparison to state median income

The first step compares your current monthly income (CMI) to the median income for a household of your size in your state. Your CMI is generally the average of your gross income from all sources (excluding Social Security benefits) over the six full calendar months preceding your bankruptcy filing.

• If your CMI is below the median income for your state and household size, you generally presume eligibility for Chapter 7.
• If your CMI is above the median income, you must proceed to the second part of the Means Test.

Example median incomes (as of November 1, 2023)

Median incomes change periodically and vary by state and household size. The following examples are provided for context and are subject to change. You can find the most up-to-date median income figures on the U.S. Courts website.

• Household size 1 — California: $83,728; Texas: $66,664; New York: $73,732
• Household size 2 — California: $110,652; Texas: $87,900; New York: $96,960
• Household size 3 — California: $123,822; Texas: $100,534; New York: $113,382
• Household size 4 — California: $143,628; Texas: $117,732; New York: $137,846
• Add approximately $9,900 for each additional household member for these states

Part 2: Disposable income calculation

If your income is above the state median, the Means Test then calculates your disposable income. This involves subtracting certain allowed expenses from your CMI. These expenses are a combination of IRS standards and actual necessary expenses.

IRS standards and allowed expenses

The Means Test recognizes fixed and local standards as well as reasonable actual expenses. Below are common categories used in the calculation.

• IRS National Standards — fixed amounts for food, clothing, and other necessities, based on income and household size
• IRS Local Standards — housing and transportation costs that vary by region
• Actual necessary expenses — certain reasonable costs not covered by the IRS standards

Examples of actual necessary expenses considered

• Mortgage payments or rent
• Car payments
• Health insurance premiums
• Childcare costs
• Court-ordered payments (e.g., alimony, child support)
• Taxes
• Life insurance premiums
• Terminally ill dependent care
• Charitable contributions (up to 15% of gross income)
• Certain educational expenses
• Medical expenses exceeding 10% of the IRS National Standards for healthcare
• Payments on secured debt (e.g., car loans, mortgage payments)
• Payments on priority unsecured debt (e.g., recent tax debt, domestic support obligations)

Thresholds and what they mean

After subtracting the allowed expenses, if your remaining disposable income over a 60-month period (five years) is below a certain threshold, you may still qualify for Chapter 7. The thresholds are:

• If your disposable income is less than $15,150 over 60 months (or $252.50 per month), you generally qualify for Chapter 7.

If your disposable income is more than *

Note: If the Means Test indicates a higher disposable income, the court and the trustee reviewing your case will assess whether a Chapter 13 repayment plan is more appropriate. Higher disposable income makes it more likely the trustee will pursue a Chapter 13 outcome, but the final determination depends on the specifics of your financial circumstances.

Chapter choices: Chapter 7 vs Chapter 13

Choosing between Chapter 7 and Chapter 13 depends on your Means Test results, the types of debt you have, and your long-term financial goals. For a deeper comparison, see Chapter 7 vs Chapter 13.

Chapter 7 highlights

• Often results in discharge of many unsecured debts within months
• May require liquidation of nonexempt assets in some cases
• Eligibility is strongly influenced by the Means Test
• Find experienced Chapter 7 attorneys to evaluate exemptions and asset protections

Chapter 13 highlights

• Creates a 3- to 5-year repayment plan for disposable income
• Can help catch up on mortgage or car payments and stop foreclosures
• Often used when the Means Test indicates the debtor can repay some amount
• Work with Chapter 13 attorneys to craft a feasible plan

How high expenses can offset high income

High necessary expenses can reduce your disposable income on the Means Test, even if your gross income is substantial. This is an important reason why six-figure earners are not automatically excluded from bankruptcy relief.

• Large mortgage or rent payments
• High childcare or education costs
• Significant medical expenses not covered by insurance
• Costly transportation needs in areas with limited public transit
• Substantial court-ordered payments like alimony or child support
• Dependents with special care needs

Documenting these expenses carefully is essential to demonstrating their reasonableness in the Means Test calculation.

Common types of debts and how bankruptcy treats them

• Credit card debt — often dischargeable in Chapter 7 or included in Chapter 13 plans
• Medical bills — commonly dischargeable and frequently a primary cause of filings
• Personal loans — treatment depends on secured status and exemptions
• Mortgage debt — bankruptcy can provide time to catch up through Chapter 13, or allow forfeiture of property in Chapter 7
• Car loans — may be reaffirmed, surrendered, or paid through a Chapter 13 plan
• Student loans — generally nondischargeable unless undue hardship can be proven
• Tax debts — some old tax debts may be dischargeable under specific conditions
• Domestic support obligations — typically nondischargeable and given priority

How to prepare and what to expect when filing

Preparation and organization improve your chances of a smooth bankruptcy process. Knowing what documents and steps are involved helps reduce surprises.

Gather financial documents

• Recent pay stubs and income statements
• Tax returns for the past two years
• Bank statements for recent months
• Account statements for retirement, investment, and brokerage accounts
• Mortgage and car loan statements
• Documentation of monthly living expenses
• Medical bills and insurance information
• Records of recent large purchases or transfers

Expectations at the meeting of creditors (341 meeting)

• Brief hearing where the trustee and creditors can ask questions about your finances
• Bring photo ID and verification of social security number
• Your attorney will usually attend and assist in answering questions

Timeline and steps

• File petition and schedules with the bankruptcy court
• Attend credit counseling and debtor education courses as required
• Attend the meeting of creditors (341 meeting)
• Trustee review and potential objections to exemptions or discharge
• In Chapter 7, possible liquidation of nonexempt assets; in Chapter 13, confirmation of the repayment plan

For a step-by-step walkthrough of the filing process, see our guide on how to file bankruptcy.

Bankruptcy exemptions and protecting assets

Exemptions determine what property you can keep in a bankruptcy. Rules vary by state and by whether you use federal or state exemption schemes. Understanding exemptions is critical for higher-income filers who may have significant assets.

• Homestead (equity in a primary residence)
• Motor vehicle exemptions
• Tools of the trade or business property
• Retirement accounts and pensions
• Wildcard exemptions that apply to various assets

To learn more about state and federal protections, consult our bankruptcy exemptions guide and speak to counsel who understands local exemption law.

Why getting legal guidance matters

Bankruptcy law is complex and procedural mistakes can be costly. An attorney helps you understand the Means Test, exemptions, and which chapter best fits your goals.

• Evaluate Means Test results and calculate allowable expenses
• Identify the best exemption scheme to protect assets
• Negotiate with creditors and trustees when appropriate
• Prepare and file required bankruptcy paperwork accurately
• Represent you at the meeting of creditors and in court if needed

If you want help evaluating options, find a bankruptcy attorney who can review your circumstances. You can also consult specialized Chapter 7 attorneys or Chapter 13 attorneys depending on your likely path.

Common misconceptions for high earners

• Misconception: "High income means automatic disqualification" — reality: allowed expenses and household circumstances matter.
• Misconception: "You will always lose your home or retirement accounts" — reality: exemptions and chapter choice affect protections.
• Misconception: "Bankruptcy destroys your credit forever" — reality: while bankruptcy affects credit, many debtors rebuild credit within a few years.
• Misconception: "I can’t afford a lawyer so I shouldn’t file" — reality: many attorneys offer consultations and some payment options; filing without counsel increases risk of errors.

Next steps if you’re a six-figure earner considering bankruptcy

• Collect and organize financial documents listed above
• Run a preliminary Means Test calculation with your attorney
• Compare Chapter 7 and Chapter 13 implications — see Chapter 7 vs Chapter 13
• Review exemptions that may allow you to keep key assets — see bankruptcy exemptions
• Contact local counsel to find a bankruptcy attorney and schedule a consultation

Frequently Asked Questions

Can I file Chapter 7 if I make six figures?

Yes. High income does not automatically bar you from Chapter 7. Passing the Means Test or demonstrating that your allowable expenses reduce disposable income sufficiently can make you eligible. Consult an attorney to run the Means Test using accurate income and expense figures.

Will I lose my house if I file bankruptcy?

Not necessarily. Whether you keep your house depends on equity, applicable homestead exemptions, mortgage arrears, and your chapter choice. Chapter 13 can often stop foreclosure and allow you to catch up through a repayment plan; Chapter 7 could result in surrender if equity exceeds exemptions.

Do medical bills qualify me for bankruptcy even with a high income?

Yes. Significant medical expenses are a common reason high earners file for bankruptcy. Medical bills can be included among allowable expenses for the Means Test and may substantially reduce disposable income.

How does household size affect the Means Test?

Household size is a key variable in determining the applicable state median income. Larger household sizes generally raise the median income threshold used in Part 1 of the Means Test and affect IRS standards in Part 2.

Where can I get help preparing to file?

Start by gathering financial documents and contacting a bankruptcy attorney. For an overview of the filing process, read our guide on how to file bankruptcy, and use our attorney directory to find local counsel.