Do I Qualify for Chapter 7 Bankruptcy?

 Posted on September 20, 2024 in Bankruptcy

Most people who are considering bankruptcy would prefer to file under Chapter 7. When you file Chapter 7 bankruptcy, any non-exempt assets you own are liquidated and used to pay back a portion of your debt. Once the liquidation process is over, the balance of your debt is cleared. While Chapter 13 does not involve liquidation, it does require you to spend almost all your disposable income on debt repayment for three to five years. When you consider the list of assets that are exempt from liquidation, it is easy to see why most people would prefer to file under Chapter 7. However, to qualify for Chapter 7 bankruptcy, you must pass a means test or show that your income is too low to allow repayment. An experienced Harris County, TX bankruptcy lawyer can help determine whether you qualify for Chapter 7 bankruptcy.

Qualifying for Chapter 7 Bankruptcy Based on Income 

Chapter 7 bankruptcy is not meant to allow people whose income is high enough to allow for repayment to escape debt. People whose income is higher than the median income in their county usually cannot file under Chapter 7. The size of your household is taken into consideration. For example, say the median income overall in Harris County is $35,000 but the median income for someone supporting a family of four is $60,000. You have a family of four. If you earn under $60,000, you likely qualify for Chapter 7 bankruptcy.

Using the Means Test to Qualify for Chapter 7 Bankruptcy

Even if your income exceeds the median level for your area and household size, you might still not be able to afford to pay back your debt. The means test considers both your income and your family’s expenses and needs. You can pass the means test based on either your total income or the amount of disposable income you have after paying for essentials like housing, food, and utilities.

For example, say the median income for your household size is $50,000. You earn $60,000, but after meeting your family’s ordinary needs, you are left with only $125 to spend on everything else. You would likely pass the means test, as you have no disposable income that could be put towards repayment.

Contact a Houston, TX Chapter 7 Bankruptcy Lawyer 

The Fealy Law Firm, PC can help determine whether you qualify for Chapter 7 bankruptcy. Experienced Harris County, TX Chapter 7 bankruptcy attorney Vicky Fealy will guide you through the means test. Contact us at 713-526-5220 for a complimentary consultation.