11 U.S.C. Section 109 - Debtor Eligibility Chapter-by-Chapter

What Is Section 109?

Section 109 is the gatekeeping provision of the Bankruptcy Code. It defines who is and is not eligible to file under each chapter. A petition filed by an ineligible debtor is subject to dismissal under Section 707(a), 1112(b), 1208, or 1307(c), depending on chapter, and ineligibility can also support an order treating the case as a nullity for purposes of the automatic stay.

Section 109(a) sets the universal floor: only a "person" that resides or has a domicile, a place of business, or property in the United States, or a municipality, may be a debtor under this title. Beyond that floor, eligibility narrows chapter by chapter.

Chapter 7 Eligibility: Section 109(b) and the Means Test

Under Section 109(b), any person eligible under Section 109(a) may be a Chapter 7 debtor with three exceptions: railroads, domestic banks and insurance companies, and certain foreign banks and insurance companies. The breadth of corporate Chapter 7 eligibility is offset by a major restriction on individual consumer debtors imposed by the 2005 Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA): the means test of Section 707(b)(2).

The means test is technically a presumption-of-abuse and dismissal mechanism rather than a Section 109 eligibility rule, but its practical effect is to render many above-median-income consumer debtors ineligible for Chapter 7 relief unless they can rebut the presumption with special circumstances. Below-median-income debtors are not subject to the means-test calculation.

A debtor who fails the means test typically must convert to Chapter 13, dismiss, or proceed to trial on the presumption. Marrama v. Citizens Bank of Massachusetts, 549 U.S. 365 (2007), confirms that bad-faith Chapter 13 filers do not enjoy an unfettered right to convert to Chapter 7 under Section 706(a) when they would not be eligible for Chapter 7 relief in the first place.

Chapter 9 Eligibility: Section 109(c) - Municipal Debtors

Chapter 9 is available only to a "municipality" within the meaning of Section 101(40) (a political subdivision or public agency or instrumentality of a state). Section 109(c) imposes four additional requirements that have made Chapter 9 the rarest of the major chapters:

• State authorization: The municipality must be specifically authorized to be a Chapter 9 debtor by state law or by a governmental officer or organization empowered by state law to authorize such filing. Roughly half of states either prohibit municipal bankruptcy outright or impose conditional or specific authorization requirements.
• Insolvency: The municipality must be insolvent within the meaning of Section 101(32)(C), which is a cash-flow test rather than a balance-sheet test.
• Desire to effect a plan: The municipality must want to adjust its debts.
• Good-faith creditor negotiation, impracticability, judicial relief avoidance, or unsecured-creditor consent: The municipality must satisfy one of the alternative negotiation prerequisites of Section 109(c)(5).

Tenth Amendment concerns about federal supervision of state political subdivisions explain the unusually elaborate gatekeeping for Chapter 9.

Chapter 11 Eligibility: Section 109(d) - Nearly Universal

Section 109(d) provides the broadest eligibility in the Bankruptcy Code. Any person that may be a debtor under Chapter 7 (except a stockbroker or commodity broker) may be a debtor under Chapter 11. In addition, railroads, which are excluded from Chapter 7, are eligible for Chapter 11.

There is no debt cap, no means test, and no insolvency requirement for Chapter 11 eligibility. An individual debtor may file under Chapter 11 even where Chapter 13 would be available, as confirmed by Toibb v. Radloff, 501 U.S. 157 (1991). Subchapter V of Chapter 11, by contrast, imposes a small-business debt cap by reference to Section 1182, which the inflation adjustments and periodic legislative amendments have moved up and down since 2020.

Chapter 12 Eligibility: Section 109(f) - Family Farmer or Fisherman

Section 109(f) restricts Chapter 12 to a "family farmer" or "family fisherman" with regular annual income, as defined in Section 101(18)-(19A). Both categories impose a debt cap and a percentage-of-debt-from-farming-or-fishing requirement. The debt caps are indexed for inflation under Section 104.

The "regular annual income" requirement parallels Chapter 13's regular-income test: the debtor must have income sufficiently stable and regular to enable funding of a plan. Seasonal income from farming or fishing operations qualifies if it provides reasonable assurance that plan payments can be made.

Chapter 12 was made permanent in 2005 after originally being enacted on a temporary basis during the 1980s farm crisis. It blends features of Chapters 11 and 13 and is procedurally more favorable to agricultural debtors than either alternative, including expansive cramdown of secured agricultural debt.

Chapter 13 Eligibility: Section 109(e) - Debt Limits

Section 109(e) restricts Chapter 13 to an "individual with regular income" whose debts fall below the statutory ceilings. Historically the Code imposed separate secured and unsecured debt caps; legislative amendments in recent years have moved toward a single aggregate cap, then reverted, with sunset provisions creating periodic recalibration. Practitioners must confirm the current cap on the petition date.

Eligibility is measured on the petition date, by reference to debts that are non-contingent and liquidated. The contingent/liquidated distinction can be outcome-determinative: a large unliquidated tort claim or a disputed contingent guarantee may not count toward the debt cap, even though it would count for distribution purposes if the case proceeded.

"Individual with regular income" is defined in Section 101(30) and is interpreted broadly. Self-employment income, retirement income, and Social Security all qualify if they are sufficiently regular and stable to fund a plan.

Chapter 15 Eligibility: Foreign Representatives

Chapter 15, added in 2005 to implement the UNCITRAL Model Law on Cross-Border Insolvency, is procedurally distinct: it is not opened by a debtor but by a "foreign representative" of a foreign proceeding. Eligibility is governed by Sections 1502 through 1517 rather than by Section 109 in the traditional sense. The foreign representative must obtain recognition of the foreign proceeding as either a foreign main or foreign nonmain proceeding under Section 1517.

Once recognized, the Chapter 15 case unlocks ancillary relief in the United States: the automatic stay (in the case of a foreign main proceeding), additional discretionary relief under Section 1521, and cooperation with the foreign court under Section 1525.

The Credit-Counseling Prerequisite: Section 109(h)

Added by BAPCPA in 2005, Section 109(h) imposes a pre-petition credit-counseling requirement on individual debtors filing under any chapter. The individual must receive, during the 180 days before filing, an individual or group briefing from an approved nonprofit budget and credit counseling agency, outlining opportunities for available credit counseling and assisting the individual in performing a related budget analysis.

The statute provides three narrow exceptions:

• Section 109(h)(2): Districts in which the U.S. Trustee determines that approved agencies are unable to provide adequate services.
• Section 109(h)(3): Temporary deferral, generally 30 days extendable to 45 days, on certification of exigent circumstances and a good-faith but unsuccessful pre-petition attempt to obtain counseling.
• Section 109(h)(4): Incapacity, disability, or active military duty in a combat zone.

Courts treat the credit-counseling requirement as a strict prerequisite to eligibility. Cases without a timely briefing certificate or qualifying exception are typically dismissed, though many districts permit refiling once the briefing is obtained.

Related Bankruptcy Code Sections

Section 109 operates in concert with several other provisions:

• Section 101 - Definitions, including "person," "municipality," "family farmer," and "individual with regular income"
• Section 104 - Periodic inflation adjustments to debt-cap dollar amounts
• Section 521 - Debtor duties triggered upon a valid filing
• Section 707 - Dismissal of a Chapter 7 case, including for substantial abuse
• Section 1112 - Conversion or dismissal of a Chapter 11 case
• Section 1325 - Chapter 13 confirmation standards