Do You Qualify for Bankruptcy?
Qualify for bankruptcy? It used to be that anyone could file for bankruptcy for almost any reason and it didn’t really matter how they owed creditors, how much they made or if they had the ability to pay back their creditors. In the early part of this decade however, Congress began to reform bankruptcy laws under pressure from banks and other creditors. Now, in the simplest terms, you must show that you cannot pay your creditors and still have enough leftover to pay for the essentials of life (food, clothing, rent/mortgage, utilities, etc.). In reality more goes into to this than that but most people aren’t interested in fine details, they just want to know if they qualify for bankruptcy. Chances are, if you are in a position where you are considering bankruptcy then you probably qualify for bankruptcy.
Means Test for Chapter 7 Bankruptcy
To determine if you qualify for bankruptcy, the court uses what is call a “Means Test”. There is a rather complicated formula that the court uses to determine if qualify. The form used for the means test looks like a tax return form and it is several pages long. Here is what the means test does:
- First, the court compiles income statistics from the Internal Revenue Service to determine income levels for your particular area.
- Then, the court uses IRS and census data to determine median household essential expenses for various family sizes.
- The median income and median essential expenses are then cross referenced and where the two intersect is the income standard or more simply it says you must make at least X amount to just be able to pay for the essentials of life, leaving very little for discretionary spending.
- If you plug your income into the means test and you are below the standard income level then you qualify for bankruptcy.
- If your income is above the income standard then, you must supply additional information about your debts to determine if you qualify for bankruptcy. When you try to file bankruptcy and your income exceeds the standard the court presumes that you are abusing the bankruptcy system. This is not as bad as it may seem. Your bankruptcy attorney can explain exactly how it works and determine which chapter of bankruptcy you qualify for. Our free proprietary Means Test Estimator below is the first step.
Presumption of Abuse
This sounds scary when you first hear it but most people still qualify for bankruptcy even if there is an initial presumption of abuse. The presumption of abuse is what is call “rebuttable”. When a presumption is rebuttable it means that you if you can demonstrate that you have more debt than you can possibly handle or that your essential expenses are much higher that the standard allowed, you may still qualify for bankruptcy under Chapter 7. However, in such a case you need an experienced bankruptcy attorney to assist and advise you.
“If after using the Means Test Estimator below and it does not indicate that you qualify for bankruptcy, please call one of expert bankruptcy attorneys at 1-855-LOMG-911 to schedule a free consultation. Even if you do not hire us, we are happy to provide you with valuable information that will improve your chances of a successful bankruptcy.”
What If I Don’t Qualify For Bankruptcy?
If you do not qualify for bankruptcy under Chapter 7 then you still have other options. There are many common misconceptions about Chapter 13 Bankruptcy. These misconceptions can frighten people away from them but this is primarily do to unqualified bankruptcy attorneys that filed Chapter 13’s for their clients during the last recession. For many these disreputable bankruptcy attorneys created horror stories ranging from overly complicated court hearings to dismissals or even accusations of bankruptcy fraud. However, Chapter 13 is an excellent solution for debtors who do not qualify for bankruptcy under chapter 7. A chapter 13 can protect your assets, restructure debt and contracts and reduce the amount that you owe to a very affordable level. In some cases you can pay back as little as 1% of your total debt and once your chapter 13 is discharged, your creditors cannot collect on your debts. A chapter 13 may still give you the relief and fresh start that you are looking for if you do not qualify for bankruptcy under chapter 7.
“Please start by using the Means Test Estimator below and then call one of our experienced bankruptcy attorneys at 1-855-LOMG-911.”