Are You Eligible to File Chapter 7 Bankruptcy?




Each year, nearly a million people file for bankruptcy in the United States. People find themselves in poor financial situations for a wide range of reasons, and you may be experiencing difficulty thanks to a handful of different factors. While there are many options for dealing with financial hardship, including credit counseling, loan consolidation, and downsizing, sometimes bankruptcy can be the best option. But how do you know if you’re eligible to file?

When it comes to Chapter 7 bankruptcy, the most common type of consumer bankruptcy, there is something called a “means test.” This test is designed to take stock of your income, and determine if it is low enough to file for Chapter 7. This is one way that high-earning people are prevented from filing this type (they can usually file Chapter 11 or 13 instead), and keep these resources for low-earning people who need an expedited and simple solution.

Just because there is a means test, it doesn’t mean that you have to be completely penniless to be eligible to file. Many people earn a reasonable monthly income, and can still wipe out the majority of their debts using Chapter 7 bankruptcy, particularly if they have high monthly expenses like their mortgage, car loans, medical costs, taxes, and more.

The means test typically takes your average income over the last six months, and subtracts certain basic expenses. This leaves you with your monthly “disposable income,” which is considered eligible to go to creditors, to pay your debts. Generally, the higher your disposable income, the less eligible you will be to file. Only those hoping to file consumer bankruptcy (not business bankruptcy) will need to take the means test.

In most cases, the first step to determining your eligibility for Chapter 7 bankruptcy in Orlando, is to see if your monthly income is more or less than the median income for a household of your size in the state of Florida. If you earn less than the median, you may automatically qualify, and will not need to fill out the rest of the means test.

If you earn more than the median, you will have to submit proof of income and expenses, to determine your fixed costs and what is left over. You may wish to work with a qualified bankruptcy attorney to help you get started, so you can get the most accurate information possible, especially if your household size/income is right around the cutoff line.

When you are ready to learn more about Chapter 7 bankruptcy and determine your eligibility, reach out to us at Nater Law. Request your free consultation to get started!

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