Filing bankruptcy can provide debt relief to debtors who are dealing with overwhelming debt. There are various types of bankruptcy that a debtor can file for, but this doesn’t mean that they’re qualified to file for each bankruptcy type.

Chapter 7 bankruptcies, also known as liquidation bankruptcies, are one of the most common bankruptcy filings. In a Chapter 7 bankruptcy, your assets and nonexempt property are liquidated and distributed to your creditors to pay off some of your debts. Once you receive your discharge at the end of the bankruptcy process, your unsecured debts are eliminated or wiped out, and you won’t have liabilities to pay it off through a repayment plan.

Before filing your bankruptcy petition, check whether you meet the qualifications to file for Chapter 7. Two factors are considered in determining your eligibility to file for bankruptcy under Chapter 7.

  1. Bankruptcy Means Test
  2. Disposable Income

If you’re considered filing for bankruptcy, consult with a local bankruptcy attorney for bankruptcy information that will help you make an informed decision before filing your bankruptcy petition to the local bankruptcy court. Read on below to learn more about Chapter 7 bankruptcy qualifications.

Bankruptcy Means Test

chapter 7 qualificationsThe bankruptcy means test is used to determine whether your monthly income is low enough to qualify for Chapter 7 bankruptcies. It prevents debtors with high incomes from declaring bankruptcy Chapter 7 to wipe out their debts since they’re eligible to file for Chapter 13 bankruptcy and repay a portion of their debts through a payment plan.

The first step to the means test is comparing your current monthly income to the state median income for your household size. You can find information regarding state median family income on the US Trustee means testing information page.

If your monthly income is less than the median income for your household size in your state, then you’re eligible to file for Chapter 7 bankruptcy. Otherwise, your disposable income will need to be evaluated further.

Disposable Income

A debtor whose household income exceeds the state median levels will have more complicated calculations for their bankruptcy means test. Your living expenses and other allowed monthly expenses are subtracted from your monthly income to determine your disposable income.

If you have enough disposable income to pay off an unsecured debt to your creditor, you fail the means test. You won’t be able to get a bankruptcy discharge through Chapter 7, but you may be able to convert to a Chapter 13 bankruptcy filing.

If your disposable income is below the specified limit, however, you’ll be qualified to declare consumer bankruptcy under Chapter 7. Make sure to discuss your other debt-relief options with your bankruptcy lawyer to determine whether filing Chapter 7 bankruptcy is right for you.

Hire a Bankruptcy Attorney

Are you thinking of filing personal bankruptcy in Maryland? Our experienced bankruptcy attorneys can help you find solutions to your debt problems. Contact Grafton Firm, LLC today, and request a free debt solution evaluation with us!