If you’re feeling overwhelmed by debt and considering Chapter 7 bankruptcy in Michigan, you may be asking yourself if your income fits within the limits required for eligibility.
In 2025, understanding the income requirements—and how they affect your ability to file—can help you make an informed decision about whether Chapter 7 is the right option for you.
Understanding the Means Test
When you decide to pursue Chapter 7, you’ll need to undergo what’s known as the “means test.” This test isn’t a strict cutoff that says “if you earn over X amount, you can’t file.” Instead, it’s designed to determine whether your income is low enough to qualify for a fresh start. In essence, if your income is below the median income for a similar household in Michigan, you’ll likely pass the means test automatically. If your income exceeds that threshold, you’ll need to dig a little deeper into your monthly expenses and disposable income.
Chapter 7 Bankruptcy Income Limits: What You Need to Know
In Michigan, the median income thresholds are updated annually. For 2025, these numbers have been adjusted to reflect current economic conditions. While the exact figures depend on your household size, here’s the general approach:
Below the Median: If your current monthly income is below the median income level for your household size, you generally meet the first part of the means test. This means that you likely qualify for Chapter 7 without further analysis.
Above the Median: If your income is above the median, you won’t be automatically disqualified. Instead, you’ll need to calculate your “disposable income” by subtracting allowable expenses (like housing, food, and transportation) from your monthly income. If that disposable income is still low enough that you wouldn’t be able to repay a significant portion of your unsecured debts, you could still be eligible for Chapter 7.
For example, if you’re a single filer in Michigan, the median monthly income might hover around a certain threshold that the U.S. Trustee Program sets each year. Families of different sizes have their own median income benchmarks. It’s essential to check the most current figures or consult with a bankruptcy attorney to see where you stand.
Why This Matters to You When Considering Filing Bankruptcy
Knowing these income guidelines is important because it directly influences your bankruptcy strategy. If you find that your income is just above the median, you might be surprised to learn that careful budgeting and a detailed look at your expenses could still allow you to qualify. On the other hand, if you earn significantly more than the median, you may need to consider alternative bankruptcy options, such as Chapter 13, where you work out a repayment plan with your creditors.
What You Should Do Next
- Gather Your Financial Information: Start by compiling a clear picture of your monthly income and expenses. This will give you a realistic view of your financial situation.
- Consult a Bankruptcy Attorney: Bankruptcy law can be complex, and the means test involves detailed calculations. A bankruptcy attorney can help you determine whether Chapter 7 is right for you and advise on alternative options if needed.
- Review Updated Income Figures: Since the thresholds can change annually, make sure you’re looking at the most up-to-date numbers for Michigan in 2025. Local legal aid resources or the U.S. Trustee Program website can be a good starting point.
Remember, bankruptcy is a powerful tool designed to help you regain control of your financial life. While the income limits and means test can seem daunting, having a clear understanding of the process can empower you to take the steps needed toward a more secure financial future.
By taking the time to assess your income and expenses against the current benchmarks, you can confidently move forward knowing that you’ve made a well-informed decision about your financial future. If you’re ever uncertain, reaching out to a professional can provide the clarity and guidance you need during this challenging time.