How Do You Know If You Qualify for Bankruptcy?
July 8, 2025
Bankruptcy can be a powerful legal tool for individuals and businesses facing overwhelming debt. It offers a fresh financial start by allowing debtors to eliminate or reorganize debts under the protection of the bankruptcy court.
However, filing for bankruptcy is a serious decision with specific eligibility requirements, especially since bankruptcy laws differ from state to state. If you’re in Nevada and struggling financially, understanding whether you qualify for bankruptcy involves multiple factors, including income, types of debt, and the specific bankruptcy chapter you want to file.
The Law Office of Scott N Tisevich, Esq, located in Reno, Nevada, is dedicated to helping clients find solutions for their problems. Read on to learn more about how to determine if you qualify for bankruptcy in Nevada by learning about the types of bankruptcy, eligibility criteria, means tests, residency requirements, and other important considerations.
Bankruptcy Basics
Bankruptcy is a legal proceeding designed to help individuals and businesses who can’t repay their debts. The U.S. Bankruptcy Code governs the process, but states like Nevada have their own rules concerning exemptions and residency requirements.
Types of Bankruptcy
The most common bankruptcy types individuals file under are:
Chapter 7 Bankruptcy (Liquidation): Allows debtors to discharge most unsecured debts by liquidating non-exempt assets.
Chapter 13 Bankruptcy (Reorganization): Enables debtors to keep property but repay debts through a court-approved repayment plan over 3 to 5 years.
Chapter 11 Bankruptcy: Typically used by businesses or very high-debt individuals to reorganize debt.
In Nevada, most consumer bankruptcies are filed under Chapter 7 or Chapter 13.
Residency Requirements in Nevada
To file for bankruptcy in Nevada, you must meet certain residency requirements. These rules help determine which bankruptcy court has jurisdiction over your case.
You must have lived in Nevada for at least 730 days (2 years) before filing. This rule is designed to prevent debtors from "forum shopping" and filing in states with more favorable laws.
If you haven’t lived in Nevada for two years, but have lived in another state, the court will look at where you lived during the 180 days before the 2-year period ended.
If you have lived in Nevada for less than 180 days, your bankruptcy must be filed in the state where you previously lived.
Residency is critical because it determines the specific bankruptcy court where the case will be filed. It also dictates which state-specific exemptions can be claimed, which are crucial for protecting a debtor's assets. Furthermore, residency establishes the applicability of Nevada bankruptcy laws as opposed to those of other states.
Means Test
One of the initial steps in determining Chapter 7 bankruptcy eligibility in Nevada is the means test, which begins with comparing your current household income to the median income for a household of your size within the state.
The U.S. Department of Justice periodically publishes Nevada's median income figures. If your income falls below this median, you automatically meet this part of the Chapter 7 qualification. However, if your income exceeds the median, you must proceed to the second step of the means test.
The subsequent step involves calculating your disposable income. This is done by subtracting allowed living expenses, such as housing, food, transportation, utilities, and taxes, from your income.
If your remaining disposable income is sufficiently low, you may still qualify for Chapter 7 bankruptcy. Conversely, if your disposable income is deemed too high, you might be required to file for bankruptcy under Chapter 13 instead.
Do You Qualify for Chapter 13 Bankruptcy?
If you don’t qualify for Chapter 7 bankruptcy, Chapter 13 may be a viable alternative. Unlike Chapter 7, Chapter 13 entails a structured repayment plan, which allows individuals to retain their property while gradually repaying their creditors over a specified period.
To be eligible for Chapter 13 bankruptcy, several criteria must be met. Firstly, you must possess a regular and stable source of income sufficient to make the required payments under the proposed repayment plan.
Secondly, there are limitations on the amount of debt you can have: as of 2025, your secured debts can’t exceed $1,729,275, and your unsecured debts must be less than $578,125. It's important to note that these debt thresholds are subject to periodic adjustments. Notably, unlike Chapter 7, there’s no requirement to pass a means test to qualify for Chapter 13.
Chapter 13 bankruptcy often presents a suitable solution for various financial situations. It’s commonly utilized by individuals whose income exceeds the limits for Chapter 7 eligibility. Furthermore, it provides a mechanism for homeowners to address and resolve mortgage arrears, preventing potential foreclosure.
Lastly, Chapter 13 can be beneficial for debtors who have non-dischargeable debts, such as certain tax obligations or student loans, as it allows for these debts to be managed through the repayment plan.
Nevada Bankruptcy Exemptions
Whether you qualify for bankruptcy often depends on what property you can protect through exemptions. Nevada allows debtors to use either the state’s bankruptcy exemptions or the federal bankruptcy exemptions, whichever benefits them more.
Key Nevada Exemptions Include:
Homestead exemption: Up to $605,000 in equity in your home.
Personal property exemption: Up to $8,000 for personal belongings.
Wildcard exemption: Around $13,500 to apply to any property.
Vehicle exemption: Up to $15,000 in vehicle equity.
Tools of the trade: Up to $5,000 for business equipment.
If you have significant assets protected by exemptions, it may make Chapter 7 more viable, as you can keep more property. Without strong exemptions, Chapter 13 might be better to protect assets.
Types of Debt That Qualify for Bankruptcy in Nevada
Not all debts can be discharged in bankruptcy, but most common debts do qualify for elimination or restructuring.
Debts that can typically be discharged include credit card debt, medical bills, personal loans, utility bills, certain tax debts after specific waiting periods, and deficiency balances after repossession or foreclosure. However, past-due child support or alimony generally can’t be discharged.
On the other hand, there are debts that generally can’t be discharged in bankruptcy. These include student loans, except in rare hardship cases, recent tax debts, child support and alimony obligations, debts incurred through fraud or willful injury, and criminal fines and penalties. Your eligibility for bankruptcy is partly determined by the types of debts you owe.
Other Eligibility Factors
Prior Bankruptcy Filings
If you have filed for bankruptcy before, there are timing restrictions on filing again:
You can’t file Chapter 7 again within 8 years of a previous Chapter 7 discharge.
You can’t file Chapter 13 again within 4 years of a previous Chapter 7 or Chapter 13 discharge.
These “time bars” may affect your qualification.
Credit Counseling Requirement
Before filing, Nevada bankruptcy law requires you to complete credit counseling from an approved agency within 180 days of filing. Without this, you can’t proceed.
Additional Considerations in Nevada
Nevada is a community property state, meaning that debts and property acquired during a marriage are considered jointly owned. This has several implications in bankruptcy proceedings. It can affect how debts are handled, how bankruptcy exemptions are applied to spouses, and whether both spouses need to file for bankruptcy together.
If someone has cosigned a loan with an individual who files for bankruptcy, the bankruptcy discharge may not extend to the cosigner. As a result, the cosigner may still be legally obligated to repay the debt, even after the original borrower's bankruptcy is finalized.
Nevada has a nonjudicial foreclosure process, meaning lenders can foreclose without a court case. Filing for bankruptcy can temporarily halt foreclosure, but the lender may resume after bankruptcy ends.
To know if you qualify for bankruptcy in Nevada, you must carefully consider your residency, income, debt types, assets, prior filings, and required counseling. Chapter 7 offers a fresh start for those with limited income and assets, while Chapter 13 provides a way to repay debts over time for those with steady income or property to protect.
Nevada’s generous homestead exemption and community property laws add intricacies but can also offer strong protection for filers. Because bankruptcy has long-term consequences, it’s crucial to analyze your unique financial situation and seek professional advice.
Contact the Law Office of Scott N Tisevich, Esq Today
Bankruptcy isn’t for everyone, but for many, it can be the critical step toward financial freedom. Serving Reno, Nevada, and the surrounding areas, including Churchill County, Lyon County, Carson City, Story County, Douglas County, and Las Vegas, Attorney Scott N. Tisevich is here to help. Reach out today for a bankruptcy consultation.