YOUR ABILITY TO FILE:
Your ability to file for Chapter 7 bankruptcy and wipe out your debts is determined by your current monthly household expenses and by your household’s Current Monthly Income, which is the sum of the following:
- Your average gross (before taxes and other deductions are taken out) income over the past six months;
- PLUS your spouse’s gross income (unless you’re separated);
- PLUS any contributions to your household expenses by other persons.
Current Monthly Income does NOT include any of the following income:
- Social Security benefits;
- Disability (Social Security) benefits; or Crime and Terrorism Victims Compensation.
Any portion of your spouse’s gross income that is not contributed to household expenses is not counted towards the amount of money you have available to repay your debts. Therefore, your spouse’s income is counted for information purposes only and will not impact your ability to file for Chapter 7 bankruptcy.
If your Current Monthly Income is less than the state median family income for a household of your size, then you will qualify for Chapter 7 bankruptcy if your household monthly expenses are not excessive (do not exceed the maximum allowed monthly expenses) and exceed. If your monthly household Bankruptcy Income is greater than the state median family income for a household of your size, then you may or may not be eligible for Chapter 7.
To Qualify for Chapter 7 Bankruptcy where your Current Monthly Income is greater than the state median family income for a household of your size, the Bankruptcy Court will apply a “Means Test” where your monthly income minus your allowable expenses (these may or may not be the actual amounts you spend on your basic living expenses) is analyzed and compared to the total amount of your unsecured debt. If your Current Monthly Income minus your allowable expenses leaves with enough money to repay a certain portion of your debts over time, you will not be eligible for Chapter 7 Bankruptcy, but you may still be eligible to file for Chapter 13 bankruptcy. In most Chapter 13 Bankruptcy cases, if your gross household income is above the state median, only a portion of your debts will be repaid (usually over a 60-month period), and any unpaid portion of your debts will mostly likely be discharged at end of the repayment period.
The Means Test is complex and requires the consultation and analysis of an experienced bankruptcy attorney.
Our law firm will assist in determining if you qualify to file a Chapter 7 Bankruptcy.