What bankruptcy do I qualify for was the question I was asked this morning as I entered an elevator this morning. It seems like a simple enough question that any attorney could easily answer in a moment or two. The problem is that determining who can file for bankruptcy is one of the more complicated steps in the bankruptcy process and is why most people work with an experienced bankruptcy lawyer to make sure they complete the process correctly.
To qualify for a Chapter 7 bankruptcy you must earn less than the state median income on a monthly basis and submit to a “means test’’ that examines their financial records, including income and expenses, along with secured (mortgages and car loans) and unsecured debt (credit card bills, personal loans, medical expenses). Certain non-essential credit purchases, designated as “luxury items,’’ might remain the debtor’s responsibility, although that can be appealed to the court.
The bankruptcy you qualify for depends on your income and debts. For a Chapter 7 bankruptcy if your income is too high you might not be eligible if you have sufficient income to pay off your debts through a Chapter 13 bankruptcy. However if your income is too low and your debts are too high you might not be able to qualify for a Chapter 13 because you won’t have enough to pay off your debts through the repayment plan. You will have to take the median test to ensure that you qualify for either type of bankruptcy.
The Chapter 7 means test involves comparing your income to a family the same size as yours in your state. If your income falls below the median amount, you can usually file for Chapter 7 bankruptcy. If your income is higher than the applicable median, a calculation of your monthly expenses, income, and debts is used to determine whether you can file under Chapter 7.
So what bankruptcy do I qualify for? An experienced bankruptcy attorney cannot just answer that question with out knowing a bunch more information. Once you get the needed information to your attorney he can run the numbers based on your situation and determine which bankruptcy you can file. In Utah call The Utah Bankruptcy Guy to schedule a free consultation to answer this question.