The means test makes it so that not everyone can simply file for bankruptcy and wipe out their debts. Those with a high amount of disposable income do not qualify. You will need to determine how your household income compares to the median in your state. If it is less, then you automatically qualify. If it is above the median, then you need to calculate your disposable income, which can get complicated.
When we calculate the means test, the formula allows certain amounts of expenses, and then the test calculates how much money you have left over. If it is higher than a certain amount, then you fail the means test. But, when we complete the means test, there are many items which vary for each person. We will use our experience to give you the best possible result to see if you qualify. It’s not simply plugging in a few numbers.
However, even if you do not qualify for Chapter 7 bankruptcy, you may still qualify for Chapter 13 bankruptcy, and the means test will determine how much of your debt you are required to pay back.
Chapter 7 for Individuals/
Chapter 7 bankruptcy is a good option for consumers who simply have too much debt and can not keep up with payments. They may have lost their job or come across unexpected expenses, such as medical bills or car repairs. If you take the means test and your income is below the median, then you qualify for Chapter 7 bankruptcy. If you want a fresh start, but do not have a regular income, Chapter 7 can wipe out the majority of your debts.
In this type of bankruptcy, we will consult with you to see what you own, and who you owe. We will then review your entire situation so that you know exactly what we expect will happen. In most cases, people can keep their house, car, and other household goods, and eliminate their unsecured debts.
A Trustee is assigned to review your case to see if you own more than you can protect. If you own more than what you are allowed to protect, the trustee may sell your assets, and use the proceeds to pay your debts. This happens in a very small number of cases.
Chapter 7 bankruptcy will wipe out unsecured debts such as credit card bills and medical bills. You are still on the hook for certain debts, such as tax debt, child support, alimony, and student loan debt. For student loan debt, you might be able to discharge that debt if you can prove that you have a permanent injury or illness that will prevent you from paying back your student loan debt. (Called the “Bruner” or “undue hardship” standard) Any attempt to discharge student loans are done in a separate and very difficult court proceeding.
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