The two chapters of bankruptcy utilized by most consumers are chapter 7 or chapter 13. A case filed under chapter 7 will be a shorter case, where the trustee assigned is looking for nonexempt property to sell for the benefit of the creditors. A case filed under chapter 13 will be open for 3-5 years, while the debtor makes monthly payments to the trustee for the benefit of the creditors.
Not every debtor will be able to file a chapter 7 bankruptcy case. Median income levels based on family size are set for each state to determine who will have the option of filing a chapter 7 case. Your median income is based on the average of your last six months of income. Your income will include: income from an employer, self-employment income, retirement, investment income, rental income, and contributions to your household from others, etc. The current median income levels for each state can be found at the U.S. Trustee’s website.
If your last six months of income is below the median income level for your state and family size, you will have the option to file a chapter 7 bankruptcy case.
If your last six months of income is above the median income level for your state and family size, you will have to “pass” the means test. The means test was created to determine if you have disposable income to pay back your creditors. The means test will average your last six months of income, deduct standard living expenses and monthly payments to secured creditors. If you pass the means test after taking these certain deductions into consideration, then you will be allowed to file a chapter 7 bankruptcy case. If you do not pass the means test, you will need to consider filing a chapter 13 case.
Debtors whose debts are primarily incurred due to the operation of a business or disabled veterans whose debt was incurred during active duty can be reviewed for a chapter 7 case without having to pass the means test.
If you previously filed a bankruptcy case that was later dismissed or you previously received a bankruptcy discharge, these circumstances can affect your ability to file a chapter 7 bankruptcy case now.
To determine if chapter 7 bankruptcy relief is an option for you, arrange for a free bankruptcy consultation with an understanding Kansas City Bankruptcy Attorney today.