Chapter 7 Bankruptcy & Income Threshold in Illinois

By Kevin Owen

Federal law allows an individual to choose between two bankruptcy options: Chapter 13, which organizes debt into a payment plan, and Chapter 7, which erases most consumer debt. Since Chapter 7 eliminates debt, there are strict income and debt limitations imposed by law to ensure that only people in the greatest need are afforded this type of protection.

Median Income Threshold Limits

To qualify for Chapter 7 protection, a debtor's income must fall below the median income for her state. This income comparison depends on several factors, including the number of household members and the state where the debtor lives. As of 2012, a person living alone in Illinois is eligible so long as her income does not exceed $46,983. The income cap increases to $59,794 for two-person households, $68,865 for three-person households and $81,570 for households with four people. If the household includes a spouse whose earnings are used to pay expenses, his income is counted as household income.

Means Testing

If a debtor's income is greater than the median income in Illinois, a second step in this "means testing" is needed to determine whether she qualifies for Chapter 7 bankruptcy protection. This is a complicated process requiring the debtor to calculate her gross household income, then subtract certain deductions to determine her discretionary spending. If the discretionary spending is greater than an amount set by law, the debtor is not qualified for Chapter 7 bankruptcy protection.

Get a free, confidential bankruptcy evaluation. Learn More


In addition to earning too much income, a debtor may be disqualified from Chapter 7 bankruptcy protection in other ways. A person is disqualified if she filed for bankruptcy in the past six months and her case was dismissed because she failed to appear for a court hearing, did not obey a court order or voluntarily dismissed the petition to protect property from a creditor. The debtor is also disqualified from Chapter 7 bankruptcy if she had debt discharged under Chapter 7 or Chapter 11 bankruptcy within the past eight years, or under Chapter 12 or Chapter 13 bankruptcy in the past six years.

Other Requirements

In addition, a debtor must also undergo credit counseling within six months prior to the filing of the petition. The petitioner must also pay filing fees to the Bankruptcy Court in addition to any other legal fees.

Get a free, confidential bankruptcy evaluation. Learn More
Provisions of Chapter 13 of the Federal Bankruptcy Laws



Related articles

What Can I Keep if My Husband Files Bankruptcy but I Don't?

Sometimes, married couples face financial obstacles that feel impossible to overcome, inhibiting their ability to provide for their families or plan for the future. When this happens, spouses may explore bankruptcy as a way out of the financial abyss and pathway to a fresh start. However, if your spouse filed for bankruptcy and you didn't, you may be wondering if you're at risk for losing any property. The answer is maybe, depending on where you live and what type of property was included in the bankruptcy.

Oklahoma Alimony Garnishment Rules

There are two basic types of Oklahoma garnishment cases involving alimony payments. In the first situation, a divorced person garnishes the wages of her former spouse in order to compel him to pay the alimony he owes her. In the second situation, a creditor, such as a credit card company, attempts to garnish the alimony payments from the spouse receiving those payments in order to satisfy a debt owed by her. The law in some states is less clear in this situation. However, Oklahoma statutes exempt alimony and child support payments from garnishment.

Is it Better to Be on Disability When Filing for Chapter 7 or 13?

If you are on Social Security disability and considering filing for bankruptcy, it can be difficult to choose between Chapter 7 and Chapter 13. Either type of bankruptcy can protect disability benefits through exemptions. However, state law governs bankruptcy and the specific rules can vary from state to state. In the end, the choice between Chapter 7 and Chapter 13 is based on an individual's personal circumstances.

Related articles

Chapter 7 Vs. Chapter 11 for Individuals

Most individuals qualify for a Chapter 7 bankruptcy. This is a good thing since compared to other chapters, filing ...

Can a Wife File Chapter 13 if a Husband's Case Was Dismissed?

Bankruptcy rules permit a person to file for Chapter 13 bankruptcy even if her spouse's individual Chapter 13 case was ...

Wage Earner Plan Vs. Bankruptcy

Bankruptcy law is designed to provide a “fresh start” from debt and sets up alternative remedies defined by the ...

Who Is a Secured Creditor in Chapter 7 Bankruptcy?

Chapter 7 bankruptcy is designed to allow individuals to obtain relief from their debts and make a fresh start through ...

Browse by category
Ready to Begin? GET STARTED