Filing Chapter 7 in 2026 United States: New Income Limits

What does bankruptcy do for debt in the United States?

Bankruptcy is a federal court process that can wipe out or restructure many types of consumer debt while protecting certain property through exemptions. It triggers an automatic stay that stops most collection, lawsuits, garnishments, and foreclosure activity while the case is pending.

Here is what bankruptcy can and cannot usually do for you in the U.S. system:

• Usually dischargeable: credit cards, medical bills, personal loans, payday loans, many old judgments, some tax debts (if they meet strict timing rules).
• Often not discharged: recent income taxes, child support, alimony, most criminal fines, many government penalties, and - unless you prove undue hardship - most student loans.
• Secured debts: like mortgages and car loans are different: bankruptcy can erase your personal obligation, but the lender keeps its lien, so it can still foreclose or repossess if you do not keep paying or redeem/reaffirm.

The two main consumer chapters are:

• Chapter 7 (liquidation): quick, usually 4-6 months, focused on discharging unsecured debt. You must pass the means test.
• Chapter 13 (reorganization): 3-5 year repayment plan supervised by the court, often used to catch up on mortgage or car arrears or when you do not pass the Chapter 7 means test.

How does Chapter 7 bankruptcy work and who is it for?

Chapter 7 is a relatively fast process that wipes out most unsecured debt if you qualify under the means test and you do not have significant non-exempt assets. It works best for people with more debt than they can realistically repay and limited income or property.

Key features of Chapter 7

• Eligibility: primarily the means test under 11 U.S.C. 707(b), plus prior filing limits (for example, you must wait 8 years from a prior Chapter 7 discharge).
• Timeline: most no-asset cases last about 4-6 months from filing to discharge.
• Trustee role: a court-appointed Chapter 7 trustee reviews your case, can sell non-exempt property, and distributes any proceeds to creditors.
• Outcome: most filers keep all of their property because it is exempt, and their discharge wipes out qualifying unsecured debts.

Basic Chapter 7 process

1. Pre-filing credit counseling: take a course from an approved provider within 180 days before filing and get a certificate.
2. Prepare and file the petition: file in your local U.S. Bankruptcy Court using the federal forms; you list all assets, debts, income, expenses, and recent transfers.
3. Automatic stay begins: most collection actions must stop immediately, including lawsuits and garnishments.
4. 341 meeting of creditors: about 20-40 days after filing, you attend a short meeting with the trustee (usually by phone or video); creditors rarely appear in consumer cases.
5. Trustee review of assets: the trustee decides whether anything is non-exempt and worth selling; in most consumer cases there are no non-exempt assets.
6. Debtor education course: complete a second course after filing, then file the certificate.
7. Discharge: if all goes well and no one objects, the court enters a discharge order wiping out qualifying debts.

How do the 2026 Chapter 7 means test income limits work in your state?

The 2026 Chapter 7 means test compares your last-6-month average income to your state's median income for your household size; if you are below that number, you typically qualify for Chapter 7. If you are above, you must complete a more detailed expense-based test to show you still cannot afford to repay a meaningful portion of your debts.

Step 1 - Understand what "current monthly income" means

• Look-back period: add up all gross income received in the 6 calendar months before the month you file, then divide by 6.
• Included: wages, bonuses, overtime, business income, regular contributions from family/roommates, some benefits.
• Usually excluded: Social Security benefits and certain payments to war crime or terrorism victims.

Step 2 - Compare to your state's 2026 median income number

The U.S. Trustee Program publishes state-by-state median income tables for the means test under 11 U.S.C. 707(b). These amounts change periodically, often in April and November each year, and will be different in 2026 than they were in 2024.

Here is how to get the actual 2026 numbers for your state and family size:

1. Go to the U.S. Trustee Program website (part of the U.S. Department of Justice).
2. Look for "Means Testing Information" or "Median Family Income Based on State/Household Size."
3. Select the chart that applies to your filing date (for a 2026 case, use the chart in effect on that date).
4. Find your state and your household size (1, 2, 3, 4, etc.).
5. Compare your 6-month average income (multiplied by 12) to the annual figure on the chart.

If your annualized income is:

• Below the median: you usually pass the means test at Step 1 and can proceed with Chapter 7, assuming no abuse based on bad faith or other special factors.
• Above the median: you must complete the second part of the means test, which subtracts standardized and some actual expenses to see if you have "disposable income" to repay creditors.

Step 3 - Handle "above-median" income in 2026

If you are above the 2026 state median, the second part of the means test uses IRS standard expense allowances plus some actual payments (such as secured debts, certain taxes, and support obligations). The test produces a monthly "disposable income" figure.

Generally:

• If your disposable income over 5 years is below a set threshold, you may still qualify for Chapter 7.
• If it is above, the U.S. Trustee or a creditor can seek dismissal or conversion to Chapter 13 for "abuse."

Because the exact dollar thresholds and IRS standard amounts also change over time, a 2026 means test calculation should always use updated software or a lawyer's current forms, not 2024 numbers.

How much of your property can you keep in a 2026 Chapter 7 filing (exemptions and homestead)?

In a 2026 Chapter 7 case, you can usually keep property that falls within the exemption limits available in your state (and, in some states, the federal exemption system). Your homestead exemption decides how much home equity you can protect; other exemptions protect vehicles, retirement accounts, household goods, and more.

Federal vs state exemption systems

• Federal exemptions (11 U.S.C. 522(d)): available in some states; amounts adjust every 3 years for inflation (last adjustment in 2022, next in 2025, which will still apply in 2026 until the 2028 update).
• State exemptions: every state has its own exemption laws; many states require you to use state exemptions instead of the federal list, a few let you choose one system or the other.
• Domicile rule: you normally use the exemptions of the state where you lived for most of the 730 days (2 years) before filing; if you moved recently, special look-back rules apply.

Homestead exemption and 2026 home equity

The homestead exemption protects equity in a primary residence. The amount varies dramatically by state and is sometimes tied to inflation or local housing costs.

• Some states have very low caps (for example, under $50,000 of equity for an individual).
• Some states have high caps or unlimited homestead protection if you meet residency and acreage rules.
• Certain states adjust their homestead amounts every year or every few years based on inflation indices; the exact 2026 figure may differ from 2024.

On top of your state law homestead, federal law imposes additional limits in a few situations:

• Under 11 U.S.C. 522(p), if you acquired your home within about 1,215 days before filing, there is a federal cap on the homestead amount, even in unlimited-homestead states (the cap adjusts for inflation).
• Under 11 U.S.C. 522(o), the court can reduce your homestead if you dumped money into your home to hinder or defraud creditors.

Other common exemptions in 2026

While exact dollar amounts change, here are typical categories that exemptions cover:

• Motor vehicle: a certain amount of equity in one car, sometimes more than one.
• Household goods and clothing: usually up to a dollar cap per item and/or overall.
• Tools of trade: equipment you use for work.
• Retirement accounts: most tax-qualified plans (401(k), 403(b), IRA up to a large federal cap) are heavily protected under federal law, whether you use state or federal exemptions.
• Wildcard exemption: some states and the federal system let you apply a "wildcard" amount to any property you choose.

How to find your actual 2026 exemption limits

1. Identify your state of domicile under the bankruptcy look-back rules.
2. Check if your state allows use of federal exemptions or requires state exemptions only.
3. Locate the most recent version of your state's exemption statutes (often in the civil practice, property, or debtor-creditor chapter of state law) and check for effective dates and inflation adjustment clauses.
4. For federal exemptions, consult 11 U.S.C. 522(d) and the Judicial Conference inflation adjustment notice that applies on your 2026 filing date.
5. Ask a local bankruptcy lawyer how trustees in your district apply homestead and wildcard rules in practice.

If your equity exceeds the available 2026 exemptions, you still may have options, such as filing Chapter 13 instead of Chapter 7, using buy-back agreements with the trustee, or delaying filing while you adjust your finances.

Can you discharge student loans in bankruptcy using the attestation form process?

Yes, you can discharge federal student loans in bankruptcy, but you must prove "undue hardship," and the process still requires a separate lawsuit inside your bankruptcy case. Since late 2022, the Department of Justice and Department of Education have used an "attestation form" process that, in practice, makes relief more accessible for many honest but struggling borrowers.

How student loan discharge works in general

• Student loans are not automatically discharged when the court grants your general bankruptcy discharge.
• You (through your lawyer, ideally) must file an adversary proceeding against the U.S. Department of Education and any other relevant lenders.
• The legal standard is "undue hardship", interpreted by most courts using the Brunner test or a similar multi-factor test.

What changed with the attestation form

In late 2022, DOJ and DOE issued joint guidance to their attorneys. They now use a standardized attestation form that the debtor completes, giving detailed information about income, expenses, household size, disability, payment history, and other hardship factors.

With that attestation, government lawyers apply a set of internal criteria to decide whether to:

• Support full or partial discharge of the loans,
• Negotiate a settlement (for example, partial discharge or better terms), or
• Oppose discharge and litigate.

Early data and anecdotal reports through 2024 show a larger percentage of borrowers obtaining at least partial relief under this policy than under the old, purely adversarial system. That policy remains the baseline unless changed by later administrations or court decisions; its exact application in 2026 will depend on any updated DOJ/DOE guidance, which you should verify at that time.

Practical steps if you want to pursue student loan discharge

1. File Chapter 7 or Chapter 13 as appropriate for your broader debt situation.
2. Discuss student loans with your bankruptcy lawyer early; not every lawyer routinely handles these adversary cases.
3. File an adversary complaint against the Department of Education and any other lenders whose loans you want discharged.
4. Complete the attestation form fully and honestly, with documentation of medical issues, job limits, or other hardship factors.
5. Participate in settlement discussions; many cases resolve without a full trial under the new framework.

How does Chapter 13 differ from Chapter 7 if you do not qualify for the means test?

If you do not pass the Chapter 7 means test in 2026 or you have assets you could lose in Chapter 7, Chapter 13 lets you repay some or all of your debts over 3 to 5 years while keeping your property. You make a single monthly payment to a Chapter 13 trustee, who distributes funds to creditors under a court-approved plan.

When Chapter 13 may be a better fit

• Your income is above the 2026 median and the means test shows significant disposable income.
• You have home equity or other assets that exceed your available exemptions and could be sold in Chapter 7.
• You are behind on a mortgage or car loan and need time to cure arrears.
• You owe priority debts (recent taxes, support) that must be paid in full but cannot be handled all at once.

Key mechanics of Chapter 13

• Plan length: usually 3 years if you are below median income, 5 years if you are above, though you can sometimes choose longer within the statutory cap.
• Payment amount: based on your disposable income after reasonable expenses and the value of non-exempt property you are protecting.
• Secured debt treatment: you can often cure arrears, sometimes "cram down" certain car loans (pay the value of the car, not the full balance) if conditions are met.
• Discharge: at the end of a completed plan, remaining eligible unsecured debt is discharged.

For high-income debtors who fail the 2026 means test, Chapter 13 is frequently the only realistic way to get court-managed relief from overwhelming debt while stopping lawsuits and garnishments.

What does a typical U.S. consumer bankruptcy cost and how long does it take?

Most consumer Chapter 7 cases cost a few thousand dollars total and finish within about 4-6 months, while Chapter 13 cases cost more in legal fees but allow payment over 3-5 years. Court filing fees are national and change occasionally, but attorney fees vary widely by region and case complexity.

Typical cost and timeline comparison

Other likely expenses

• Credit counseling and debtor education: usually $10 - $50 per course, sometimes free for low-income filers.
• Credit reports, appraisals, and valuations: minimal in simple cases, more in complex or high-asset cases.
• Adversary proceedings (e.g., for student loans or disputed debts): often billed separately if your lawyer agrees to handle them.

When should you hire a bankruptcy lawyer or other expert?

You should hire or at least consult a bankruptcy lawyer if you have significant assets, above-median income, or special issues like tax debt or student loans, because small mistakes can cost far more than legal fees. If your case is simple and you are far below the means test thresholds, you might manage a pro se (self-filed) case, but you still benefit from at least one paid or free consultation.

Situations where professional help is especially important

• Means test borderline in 2026: your income is near or just over your state median and you are unsure how to count overtime, bonuses, or irregular income.
• Non-exempt assets: you have home equity, multiple vehicles, a business, or valuable collectibles.
• Recent transfers: you have given or sold property to family or friends, or repaid one creditor over others, in the last few years.
• Student loans: you want to use the attestation form process and file an adversary proceeding for undue hardship.
• Tax and support debts: you owe the IRS, state tax agencies, child support, or alimony.

How to vet a bankruptcy lawyer

• Look for someone who focuses heavily or exclusively on bankruptcy, not a generalist who files only a few cases per year.
• Ask how they handle means test calculations and whether they regularly file cases for above-median clients.
• If student loans are a key issue, ask how many student-loan adversary proceedings they have handled post-2022.
• Request a written fee agreement that clearly states what is included and what costs extra (for example, lien strips, adversary lawsuits).

In addition to lawyers, you might talk with a HUD-approved housing counselor about foreclosure issues or a nonprofit credit counselor about alternatives like debt management plans, especially if your situation is still salvageable without court intervention.

What are your next steps if you are considering bankruptcy for 2026?

Your next steps are to map your income, assets, and debts against the 2026 means test and exemption rules for your state, then decide whether Chapter 7 or Chapter 13 gives you the best outcome. Start early, because timing small changes in income or equity can decide whether your case is smooth or difficult.

Action plan for a potential 2026 filing

1. Inventory your finances: list all debts (amount, interest rate, secured vs unsecured), all assets (with estimated values and loan balances), and your last 12 months of income.
2. Check current means test data: closer to your filing date in 2026, pull the latest U.S. Trustee median income chart and IRS standard expense tables and plug in your numbers.
3. Evaluate exemptions: identify your state of domicile and whether you can use federal exemptions; then look up or confirm with a lawyer the homestead and other exemption caps that will apply on your intended filing date.
4. Review student loan options: decide whether you want to attempt discharge using the attestation form, and gather records showing hardship (earnings history, disabilities, job limits, family responsibilities).
5. Schedule at least one legal consultation: take your lists and calculations to a local bankruptcy lawyer; ask them to stress-test your 2026 plan and spot any risks like non-exempt equity or preferential transfers.
6. Choose timing strategically: work with your lawyer to pick a filing month that optimizes your 6-month income window and exemption position, and avoid new debts or asset transfers that could complicate your case.

Handled thoughtfully, a 2026 bankruptcy filing can give you a real fresh start while preserving as much of your property as the law allows and, in some cases, even tackling long-ignored student loans through the newer attestation process.