The decision to explore bankruptcy as a solution to serious financial problems is a difficult step to take. Sometimes our clients find themselves in a precarious financial position through no fault of their own and find that bankruptcy is the most sensible solution to their financial difficulties. Chapter 7 bankruptcy is available to individuals who meet specific income criteria.

Chapter 7 Bankruptcy Eligibility Criteria

In general, bankruptcy protects an individual from legal action by creditors. Unlike Chapter 13 bankruptcy which allows you to reorganize your debt, a completed Chapter 7 bankruptcy filing eliminates your debt and removes all legal responsibility for payment. Because the goal of Chapter 7 is to limit this type of bankruptcy filing to those who truly cannot pay their debts, the following eligibility criteria, called a means test, must be met.

  • Compare your income to the median income for your state. You are considered automatically eligible for a Chapter 7 bankruptcy filing if your income is less than your state’s median.
  • If your income is greater than your state’s median income, then you must determine the amount of disposable income you have each month that could be applied to a debt. If your disposable income, after accounting for necessary expenses, is below the threshold for your state, then you pass the means test and you are eligible for Chapter 7 bankruptcy.

We recommend that you consult with an attorney to determine the type of bankruptcy that is best for you. If you fail the means test or decide that a Chapter 7 filing is not for you, you can still qualify for a reorganization of your debt under Chapter 13 bankruptcy. Your Clark and Washington attorney can help you explore your options and decide a course of action that best fits your individual circumstances. Contact us at 770-488-9302 to set up a free consultation today.

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