Do I Qualify For Bankruptcy?

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This question is asked time and time again by potential clients.  The only accurate answer is maybe, depending on your income, expenses and assets.  Bankruptcy is all about your income, expenses and assets and how they interact to form a financial picture.

Chapter 7 Bankruptcy

To qualify to file a Chapter 7 bankruptcy the means test must be passed or be negative.  If the means test is zero or negative, then that means there is no monthly disposable income to pay back unsecured creditors, and therefore a complete discharge of debts is acceptable.  The means test was created in 2005 when the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) was passed by Congress.  The means test takes the average income for the six-month period prior to the month the bankruptcy case was filed and compares that average to the median income for the county lived in.  The means test then applies certain standard deductions for food, housing, utilities, vehicle expenses, health care costs and other deductions based upon the number of people in the household.  The problem is the means test is a fiction, not actual reality.  The means test attempts to apply a standardized system on households that are far from the same. During your free consultation with our bankruptcy lawyer you will discuss your income, expenses and assets to determine if bankruptcy can help you.

Chapter 13 Bankruptcy

There are quite a few reasons to file a Chapter 13 bankruptcy.  See Chapter 13 Basics for more details about circumstances that a Chapter 13 bankruptcy is helpful.  Just like a Chapter 7 bankruptcy, Chapter 13 bankruptcy is a function of income, expenses and assets.  Chapter 13 bankruptcy also incorporates the means test.  The means test in a Chapter 13 bankruptcy helps to determine how much monthly disposable income is available to pay back unsecured creditors in the Chapter 13 plan of reorganization.  Just like in a Chapter 7 bankruptcy there may not be any monthly disposable income to pay back unsecured debt.

The means test is a very complicated form that is the essential part of filing for bankruptcy protection since the passage of the BAPCPA in 2005.  It is imperative that anyone facing burdensome debt consult with a San Jose bankruptcy lawyer prior to filing for bankruptcy protection.