Not everyone qualifies for a Chapter 7 bankruptcy. If you are a high-income earner or have a substantial amount of disposable income, it is unlikely you will qualify. However, you should never assume you are ineligible without first taking the Chapter 7 means test. If you have a substantial amount of expenses, it is possible you might qualify. Continue reading to learn more about the means test and how it works.
Taking the Chapter 7 Means Test
The means test exists to limit the use of a Chapter 7 bankruptcy to individuals who cannot pay off their debts. During this test, your monthly expenses will be deducted from your current monthly income to determine your disposable income. The more disposable income you have, the less likely it is that you qualify for a Chapter 7 bankruptcy. However, you might still qualify for a Chapter 13 bankruptcy.
Additionally, when taking the means test, you will determine if your income is greater than the median in your state. If you earn more than the median, this might also indicate that you do not qualify for a Chapter 7 bankruptcy. If your income is less than the median in the state, however, you will not have to proceed any further with the means test.
What Happens if You Do Not Pass the Means Test?
As stated above, if you do not pass the Chapter 7 bankruptcy means test, this does not mean you cannot file for bankruptcy. Instead, it means that your options are limited to filing for a Chapter 13 bankruptcy, which is essentially a restructured payment plan that lasts for three to five years. Unlike a Chapter 7 bankruptcy, which discharges most debts, debtors must pay back a portion of their debts in a Chapter 13 bankruptcy.
If you have concerns about keeping your assets while filing for a Chapter 7 bankruptcy, you will be relieved to know that some assets are exempt, such as a car or equipment for work. You can typically hang onto these assets.
Keep in mind that even if you do qualify for a Chapter 7 bankruptcy, it does not mean you should file for bankruptcy. To ensure you make the right choice for your financial future, consult with an experienced bankruptcy attorney and learn more about your options. With legal guidance on your side, you can feel confident in your path toward a brighter economic future.
Speak to a Knowledgeable Bankruptcy Attorney Today!
If you are struggling to pay off your debts, you should consider filing for bankruptcy. At the Law Office of Simon Goldenberg, PLLC, our bankruptcy team has the experience and knowledge to help you navigate this complex process and will ensure you make the right choice for your situation. We understand how stressful overwhelming and insurmountable debt can be. Our team is committed to helping you achieve the stress-free life you deserve.
Get started on achieving debt relief today and contact our law office at (888) 301-0584 to set up a free initial consultation.