It’s an easy question to ask but it can be a very difficult question to answer, even for an experienced bankruptcy attorney. So how do you qualify for a chapter 7 bankruptcy? The easiest answer is that you will qualify if, after all of your required household expenses (housing, food, insurance, car payments, etc.), there is nothing left over to pay toward your unsecured creditors (like credit cards, medical bills, etc.). However, it’s not that easy.
Bankruptcy laws changed in a major way in 2005. Prior to the new laws, all an individual had to do to qualify for a chapter 7 bankruptcy was to show there was nothing left over to pay towards their unsecured creditors. After the bankruptcy laws changed, you had to show the above and pass the means test. So what’s the means test?
In short, the means test is a calculation used by the bankruptcy courts to determine if a debtor (the person filing for bankruptcy) is abusing the bankruptcy laws. Usually, when a bankruptcy case is filed, the debtor is required to show their last 6 months of income (there are special circumstances in which the debtor would not have to show 6 months of income). This figure will determine if he or she is above the median income level for their household size. If they are below the median income, then they immediately look to old bankruptcy law to determine if they qualify (net income minus normal household expenses equals nothing left over for unsecured creditors). If they are above the median income, then they must fill out the means test form to see if they pass the means test or not.
If a debtor does not pass the means test, it does not preclude him or her from filing a chapter 7. It simply means that there is a presumption of abuse in their case. To defeat the presumption of abuse, a debtor would have to show a change of circumstances or other reasons that would allow the court to grant a chapter 7 discharge. It’s not uncommon for this to happen. My firm handles cases like this all of the time. This is where an experienced bankruptcy attorney can be a huge asset in getting you an immediate fresh start via a chapter 7 versus being in a chapter 13 for five years.
So, do you qualify for bankruptcy? It’s not an easy yes or no. I will need to see your income, expenses, debts and assets and I will need to fully understand you financial situation. Most cases qualify for chapter 7 fairly easy. But there are quite a few that require an experienced bankruptcy attorney assistance to push them through the chapter 7 process.
If you would like to see if chapter 7 is an option for you, please feel free to give me a call.
Brian Limbocker, J.D., LL.M.
Limbocker Law Firm, LLC
2230 Towne Lake Parkway
Building 800, Ste. 140
Woodstock, GA 30189
(Offices also available in Marietta, Kennesaw, Atlanta and Duluth)