Chapter 7 bankruptcy can allow you to finally obtain financial freedom by discharging most, if not all, of your unwanted debts. While there are many serious considerations that need to be examined when contemplating filing a Chapter 7 bankruptcy, this option can give you the fresh-start that is desperately needed. A Chapter 7 bankruptcy could help you get on the right track to restoring your financial standing and rebuilding your future. However, not everybody is eligible to file for this type of bankruptcy, and those who wish to file for it must pass what is known as the “means test.” This chapter 7 means test is a complex system of determining whether your income is to high to be eligible to file. In instances where your income is too high to qualify for a Chapter 7 bankruptcy, a Chapter 13 bankruptcy may be a possible solution.
The Chapter 7 Means Test
The means test was developed to prevent abuse and overuse of Chapter 7 bankruptcy by those who simply looked to avoid paying off their debts. The Chapter 7 means test only applies to consumer debt, so if you are filing bankruptcy for non-consumer debt the means test does not apply. The means test is comprised of two questions.
Is your income more than the median?
This is the easier of the two questions. Look at your family’s current monthly income and compare it to the median income for a household of your size in Florida. If your family’s income is below this level, you automatically pass and are eligible to file for Chapter 7 bankruptcy. If your income is higher, then you must ask the second question.
Do you have enough disposable income to repay some debts?
If you do earn above the state’s median income level, you have to determine whether you have enough income left over after your “allowed” monthly expenses to pay off a portion of your unsecured debts. If your “disposable income” (the money left over after your allowed expenses) is higher than a certain amount compared to your allowed expenses, then you fail the means test and cannot file for Chapter 7. The easiest way to determine whether or not you pass the means test is to use an online calculator, such as the one found at Legal Consumer. There are many factors that can effect whether you can pass the means test, so it is highly advised to speak with a Brevard County bankruptcy attorney about your particular situation.
- Related Blog: How the Means Test Works
If You Don’t Pass the Means Test
If you do not pass the means test, you cannot file for Chapter 7 bankruptcy. However, this does not mean you are left without options. You can still file Chapter 13 bankruptcy, which gives you the ability to restructure your debts and develop a plan to pay them off at a fraction of what is owed.
You also have other non-bankruptcy alternative options that may be better-suited to your needs, such as debt settlement or negotiation. You may also benefit greatly from a credit counseling service, who can help you develop a plan to obtain financial freedom on your own without the negative consequences of declaring bankruptcy.
If you do wish to declare Chapter 7 bankruptcy, you should do so with the assistance of a Brevard County bankruptcy lawyer. At the Buchalter Law Group, we are motivated by your success, and we strive to help each of our clients obtain the financial freedom they are seeking through whatever means are most beneficial to them. Whether you need assistance with Chapter 7, Chapter 13, debt negotiation, or any other facet of debt resolution, you can trust that our team will handle your case with the utmost professionalism and dedication to your best possible outcome.
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