If you, like many others across Louisiana, find yourself struggling under mounting debt and financial pressure, you may be wondering if filing for bankruptcy might give you the fresh start you desperately need. While you may be somewhat familiar with the terms “Chapter 7” and "Chapter 13,” you may not fully understand the specifics about the two types of filings or know which route might be best for your circumstances.
Nowadays, the majority of personal bankruptcy filings are of the Chapter 7 variety, but not everyone has both options available to them. A Chapter 7 bankruptcy typically dispels most of your debts, while filing for Chapter 13 bankruptcy means you must pay back at least part of them. Whether you even have the option of filing for a Chapter 7 bankruptcy, however, comes down to how you perform on the bankruptcy means test.
The bankruptcy means test assesses your income and expenses to determine whether you have enough of what is known as “disposable income.” Disposable income is essentially any money you have left over after paying for essentials that you should reasonably be able to put toward your existing debts.
There are two rounds involved in the bankruptcy means test, but you may be able to avoid the second round by passing the first. The first step in the means test simply involves comparing your household income against that of the median household in Louisiana. If your income is lower than that figure, you pass the means test, plain and simple. If your income surpasses the median household income in Louisiana, but you still want to file Chapter 7, you must proceed to step two, which involves providing documentation about your expenses and income. Depending on how much disposable income the test shows that you have, you may or may not be able to proceed with Chapter 7.
Even if you do not pass the bankruptcy means test, you may still be able to file for Chapter 13. You can also try to pass the means test again, provided you wait at least six months first.