Have you found that it is becoming more and more difficult to stay on top
of your debt? If so, you may be thinking that bankruptcy would be a practical
next step; however, what you may not realize is that you must qualify
to file under certain chapters of the U.S. Bankruptcy Code. Although almost
anyone who is struggling with debt can file a
Chapter 13 bankruptcy petition, not everyone will qualify for
Chapter 7. This is because Chapter 7 bankruptcy allows a debtor to discharge most,
if not all, of their unsecured debt in a very short amount of time. In
fact, the entire process may take only 3-6 months.
In an effort to limit the amount of people who qualify for such a significant
discharge of debt, it is now a requirement that you take what is known
as the "means test." The first part of this test is simple.
If your current monthly income is less than the median income for a household
of your size in your state, you would qualify to file under Chapter 7. If it is not, this test would then evaluate your current monthly income,
deduct the costs of necessary monthly expenses (i.e. money for food, rent,
clothes, etc.) and determine how much "disposable income" you
are left with at the end of each month.
The bankruptcy courts are of the mindset that disposable income should
be used to pay off any outstanding debts, so if this number is too high,
you will likely be prohibited from filing under Chapter 7. Even if you
don't pass the means test, however, it is important to understand
that you still have options. In most cases, those who don't qualify
for Chapter 7 bankruptcy will subsequently file under Chapter 13. This
process is a little different, as it will require you to restructure your
debt and come up with a repayment plan. At the end of the bankruptcy,
any remaining debts would be discharged.
If you are interested in finding out whether or not you qualify for Chapter
7 bankruptcy, or you would like to learn more about your options,
contact our firm for a
free case evaluation.