A full-time job does not automatically stop you from filing for Chapter 7 bankruptcy. Eligibility depends on your income, household size, expenses and overall financial situation. Chapter 7 eligibility is based on federal bankruptcy law. If you live in Texas, state exemption rules may also affect what property you can protect.
How the means test works
Chapter 7 usually starts with a means test. The test compares your average monthly income from the six months prior to filing with the median income for a household of the same size in your state. The applicable median amount varies based on how many people are in your household.
If your income is above the median, the analysis may continue. That second step looks at certain expenses and deductions to see whether you have money left over to pay creditors. A steady job does not decide the result by itself.
When full-time workers may still qualify
Many people with full-time jobs still qualify for Chapter 7. Qualification often depends on whether your necessary living expenses balance out your total earnings. The means test may account for:
- Housing costs
- Transportation costs
- Taxes and insurance payments
- Child support or similar obligations
- Medical expenses
- Other allowed expenses
In some cases, other legal exceptions may also affect whether the means test applies.
What happens after eligibility is established?
Passing the means test does not mean every asset is protected or every debt can be erased. Your property must still be reviewed under the exemption rules, and some debts may not be discharged.
For a Texas resident, both federal and Texas exemption rules may matter when deciding whether Chapter 7 is the right fit.
What full-time workers should consider before filing
Having a full-time job does not rule out Chapter 7 bankruptcy. What matters most is how your income, expenses, debts and assets fit the bankruptcy rules. A bankruptcy attorney can review your financial information and explain whether Chapter 7 may be an option.