What is Consumer Bankruptcy?

There are a lot of misconceptions about what a consumer bankruptcy is, and what it means for the people who file it. Assumptions about consumers’ faults and the process itself can make some people afraid to file for bankruptcy at all. Others may wait far longer than they should, subjecting themselves to relentless collection calls and stress. Understanding what a consumer bankruptcy is, and isn’t, is the first step to making a well-informed decision about whether filing a bankruptcy petition is right for you.

What is a Consumer Bankruptcy?

Bankruptcy is a legal process that allows debtors to pay down secured debt, eliminate unsecured debt, and get a fresh financial start. Bankruptcies can be controlled by both state and federal law, but in Connecticut, all bankruptcy cases are filed in federal court.

Consumer bankruptcy is the process available to individuals and married couples with personal debts. It does not apply to business-related debt. In contrast, corporate bankruptcy is used for business corporations. In most cases, consumers choose when and how to file for bankruptcy, but in rare cases, a creditor can force an involuntary bankruptcy petition as part of their debt collection efforts. Depending on the type of bankruptcy you file, you may be able to resolve your debts in a matter of months, or create a structured plan for the next few years. At the end of the process, any dischargeable debts that have not been paid will be written off, so you don’t have to worry about them any longer.

Types of Consumer Bankruptcy

If you are considering filing for consumer bankruptcy, it is important to know that you have options. Most consumers file under either Chapter 7 or Chapter 13 of the federal bankruptcy code. Each chapter has different requirements and procedures, but both have an end goal of helping consumers get control of their financial futures.

Chapter 7 Liquidation Bankruptcy

A Chapter 7 bankruptcy is a relatively short process through which the bankruptcy trustee liquidates (sells) any non-exempt assets the consumer owns, and uses those assets to pay off their debts. While this may sound harsh, the reality is that most of the property owned by consumers who qualify for a Chapter 7 bankruptcy is covered by one or more exemptions. Working with an experienced bankruptcy attorney can help you claim the largest exemptions possible, under either state or federal law, to protect as many of your assets as you can. That way you can walk away from your debt without losing the property most important to you.

Chapter 13 Wage Earner Reorganization

If a Chapter 7 bankruptcy is a “fire sale” a Chapter 13 bankruptcy is a smooth, steady stream of water. A Chapter 13 consumer bankruptcy sets out a structured way for you to repay part of your debt under the supervision of the bankruptcy trustee, and then discharge the rest. A Chapter 13 repayment plan often lasts three to five years, allocating all your family’s disposable income to paying down your debt, while retaining funds necessary for things like housing, transportation, food, and other reasonable living expenses.

Who Qualifies to File a Consumer Bankruptcy

Depending on your household income and debts, you may qualify to file a Chapter 7 bankruptcy, a Chapter 13 bankruptcy, or both.

Chapter 7 Means Test

Under Chapter 7, you must meet a “means test”, the first part of which measures your current monthly income against the median income for a household of your size in Connecticut. According to the Census Bureau statistics through October 31, 2025, the annual median income in Connecticut is:

• Single Earner: $82,341 ($6,861.75 per month)
• Married Couple: $102,414 ($8,534.50 per month)
• 3 People: $126,343 ($10,528.58 per month)
• 4 People: $159,767 ($13,313.92 per month)

For each additional person in your household, the means test ads an additional $11,100. If you are “over-median” (meaning you make more than the median amount), you and your bankruptcy attorney will need to make use of standard and actual deductions to bring down that total. If you have less remaining monthly income than 25% of your unsecured debt, you qualify for a Chapter 7 Consumer Bankruptcy.

Chapter 13 Debt Limitations

Unlike a Chapter 7 bankruptcy, there is no limit to the amount a consumer can earn and still file a Chapter 13 bankruptcy. Instead, the program has relatively high limits on the amount of secured and unsecured debt a consumer can have. In fact, to get your Chapter 13 repayment plan approved by the trustee, you must create a feasible plan to use your disposable monthly income to pay down your debts. That means you need to have enough income, rather than not too much.

What Debts Can be Discharged in Bankruptcy

Bankruptcy allows consumers to discharge most unsecured debts, including credit cards, medical bills, utility costs, and personal loans. Secured debts like mortgages and auto loans usually survive the process, and certain other debts, like student loans, child support and spousal support, and recent tax debts are also non-dischargeable by law.

Choosing the right type of consumer bankruptcy requires a careful analysis of your family’s income, assets, and debts. Bankruptcy isn’t right for every family, but for many, it can be a financial reset that allows you to move forward, rebuild your credit, and make a better future for yourself and your family. At Lawrence & Jurkiewicz, our bankruptcy attorneys focus our practice on helping people. We will meet with you to review your assets, debts, and income sources, and identify the best consumer bankruptcy options for you. Our bankruptcy attorneys want to help you get a fresh start. Please contact us for a free consultation or call us at (860) 378-2693.