As you may already know, in order to qualify for Chapter 7 bankruptcy you have to pass a "means test." The means test was put in place to reserve bankruptcy for people who need it most. As a result, people with higher incomes are not allowed to file for Chapter 7 bankruptcy.
The means test determines your monthly "disposable income," which is calculated by subtracting certain monthly expenses from your current monthly income. People with higher disposable incomes are less likely to qualify for Chapter 7 bankruptcy.
However, if your current monthly income is less than your state's median income for a household of your size, then you automatically pass the means test and you do not need to worry about calculating your disposable income.
Bankruptcy still possible without passing the 'means test'
Unfortunately, if you have a good job and earn a decent income then you might not qualify for Chapter 7. But the good news is that you still may be able to get help reducing your debts through Chapter 13 bankruptcy.
Chapter 13 is also a good option for people who do not want to liquidate their assets, which is required as part of the Chapter 7 bankruptcy process.
Chapter 13 bankruptcy involves creating a plan to repay your debts over a period of three to five years. Instead of paying all of your creditors separately, you pay a court-appointed trustee who then divides the payment among your creditors.
There are many potential benefits of Chapter 13 bankruptcy. For one, your repayment plan allows you to make lower payments and stretch out debt repayment over a longer period of time without late fees or other penalties. You also get to keep the property that you are making payments on instead of worrying about repossession. Sometimes, your overall debt is reduced.
Read more about filing for Chapter 13 bankruptcy in this article, or meet with an experienced bankruptcy attorney in your area for personalized advice on whether filing would be a good option for you and your family. Some bankruptcy firms, including our Alexandria firm, offer free consultations.