Qualifying For Chapter 7 Bankruptcy: Everything You Need To Know About The Means Test
Filing for bankruptcy can give you the debt relief you have longed for and that you need so desperately to get your finances back on track. If you file Chapter 7 bankruptcy, you can have all your unsecured debts discharged. That means that, if you are approved, you could say goodbye to thousands of dollars in credit card debt, medical bills, personal loans, and other unsecured debts. There is no limit on how much debt can be discharged in the filing.
However, before you can reap the benefits of the Chapter 7 bankruptcy, you have to qualify to file. One of the primary ways you do that is by passing what is known as the means test.
Passing the Means Test & repaying your debts
The means test is designed to measure your ability to repay your debts – or at least a portion of them. Some people do not have to take the means test to qualify for Chapter 7 bankruptcy, such as disabled veterans and reservists who accumulated their debts while on active duty. However, the vast majority of people do have to pass the test in order to qualify for Chapter 7.
To pass the means test, you have to make less than the median income in your state. In Arizona, the median income is $55,839 for an individual. The more people that are in your household, the greater your income can be. For example, the median income for a household of four is $85,714.
Simply making less than the median income does not mean that you are in the clear to file for Chapter 7 bankruptcy, but it is a pretty good indicator that you will qualify. You’ll still need to pass a few other requirements, which a qualified bankruptcy attorney can help you understand.
Options if You Don’t Pass the Means Test: chapter 13 Bankruptcy
Just because you don’t pass the means test doesn’t mean that you can’t file for bankruptcy and get the debt relief that you so desperately need. Chapter 13 bankruptcy is a viable option for those who don’t qualify for Chapter 7. Chapter 13 bankruptcy does not simply discharge your debts; rather, it restructures them into a three- to five-year repayment plan that is calculated based on your actual ability to pay. You will make one monthly payment to the bankruptcy court, which will be distributed to your creditors. You can even use Chapter 13 bankruptcy to save your home from foreclosure by putting what you owe into the repayment plan.
In some cases, any debt you have remaining at the end of the repayment period can be discharged. For example, if you took out a second mortgage on your home and you now owe more than your home is worth, the excess debt may be able to be discharged at the completion of a Chapter 13 plan. You’ll need to talk to your bankruptcy attorney about your financial specifics to know what will be possible. But know that you will come out of Chapter 13 bankruptcy with a much lighter debt load and a greater handle on your personal finances.
Filing for bankruptcy can help you get out from under the weight of crushing debt. Chapter 7 bankruptcy does provide a kind of instant relief if you have a lot of credit card and other unsecured debt. You can have it discharged and be done with it completely. However, you should not give up hope if you do not qualify for Chapter 7. Chapter 13 bankruptcy still provides a lot of great debt relief, and you will end up paying far less to your creditors through this court-designed repayment plan.
contact professional bankruptcy lawyers in gilbert
Call Gilbert Bankruptcy Lawyers today to learn more about your options for debt relief through bankruptcy protection. Our experienced attorneys represent clients in both Chapter 7 bankruptcy and Chapter 13 bankruptcy, helping them find the option that will give them maximum debt relief. An attorney from our team will talk to you about your goals and review your finances then make recommendations that will best meet your needs. We offer compassionate counsel and affordable legal help. Call us in Gilbert today to schedule a consultation with a bankruptcy attorney to learn more.