Qualifying for a Chapter 7

Most of my clients want to file a Chapter 7 bankruptcy. After all, the complete debt relief that a Chapter 7 can provide seems more desirable than the payment plan that a Chapter 13 provides. However, the new bankruptcy law enacted in 2005 requires a means test which involves an analysis of a debtor’s income for 6 months. This income is compared to the median income for the state. A debtor’s income is analyzed based on the number of people in the household. If the income is lower than the median income, then it is presumed that the debtor qualifies for a Chapter 7 although the court will still look at whether it appears that there is extra income available to pay creditors.

Even with income higher than the median, debtors may still be able to file a Chapter 7 bankruptcy. If a debtor no longer earns the higher income due to a job loss or reduced income, then an affidavit can be filed with the court showing that the means test shouldn’t apply. Also, the means test provides additional calculations for higher income debtors to see if they can qualify for a Chapter 7. That’s why it’s important to see an attorney about qualifying for a Chapter 7. There may be ways for a debtor to qualify for a Chapter 7 bankruptcy now or in the future with accurate analysis and planning.