If you are thinking about filing for Chapter 7 bankruptcy, you need to understand the different criteria you will be judged on. In most cases, your bankruptcy lawyer will let you know immediately you whether or not you are eligible for bankruptcy. In general, your income needs to meet a certain threshold, you must not have filed for bankruptcy during a certain period, and you need to convince the court of your case.
Here are a few scenarios in which you won’t be able to file for Chapter 7 bankruptcy.
Your Income Meets Debt Payment Criteria
Unlike before, there is specific criteria on who can stay in Chapter 7 bankruptcy when it comes to debt repayment. Previously, it was up to the judge to decide whether you are eligible for Chapter 7 bankruptcy. For instance, if the judge believed you to have the income to fund a repayment plan through Chapter 13, then he or she had the power to force you to do so.
This is not the case nowadays. There is a clear eligibility criteria known as the “Means Test,” which will be the basis of whether you will be asked to file Chapter 7 or 13.
Before you are asked to do the “means test,” your income will play a major role in the decision of whether you will be eligible for Chapter 7 bankruptcy. Your current monthly income will be taken into account and compared to average American monthly income required for a family of your size.
Keep in mind that the basis for your “current monthly income” is the median of your income for the last six months before filing. You are only eligible to file for Chapter 7 bankruptcy if your current income is lower or equal to the average family income. It is only after this that you will have to pass the ‘means test’ before you can file for Chapter 7 bankruptcy.
Your Disposable Income
Your disposable income is also taken into account to check whether or not you can repay your debts comfortably. The purpose of the ‘means test’ is to subtract your required allowance and check if you have enough disposable income to pay at least part of your debts. If this appears to be possible, then you won’t be able to file for chapter 7 bankruptcy.
Your bankruptcy lawyer will be able to guide you through the different eligibility criteria and guide you on whether you meet the criteria for Chapter 7 bankruptcy. Make sure to get in touch with a trusted and reliable bankruptcy lawyer immediately.
The Bankruptcy Means Test: Are You Eligible for Chapter 7 Bankruptcy?, nolo.com
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