When you are facing overwhelming debt and all the burdens that come with it, Chapter 7 bankruptcy can be a viable option for relief — but only if you qualify to file for it.
Chapter 7 bankruptcy is one of the most common forms of debt relief that discharges debts within a few months after the initial filing date. However, not every debtor meets the income requirements that limit who can and cannot petition for this kind of relief. In order to understand if you qualify for Chapter 7, it is important to learn more about the “means” test.
Your ability to repay your debts without Chapter 7 has to be considered
The Chapter 7 bankruptcy means test examines an individual’s average income compared to their state’s median income. An individual’s average income may include wages, tips, overtime, rental income and bonuses. If an individual’s income is lower than the state’s median income, then they generally qualify for a Chapter 7 bankruptcy.
If an individual’s income is higher than the state’s median income after calculating their wages, tips and other forms of income, however, that does not automatically bar them from filing Chapter 7. Instead, they can show additional financial information that reflects their ongoing living expenses. In many cases, this will allow debtors to proceed with Chapter 7 despite income that is somewhat higher than the state’s median.
If an individual does not pass the bankruptcy means test after providing additional financial information, then they may be unable to file for Chapter 7 protection — but that will not stop them from filing for a Chapter 13 bankruptcy instead.
Professional legal guidance can help individuals determine whether they qualify for Chapter 7 bankruptcy and help them prepare for the bankruptcy means test. If you’re uncertain if you qualify, it can help to talk over your options with someone who fully understands that process and rules.
