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Bankruptcy Help For Everyday People

How do I know if I qualify for Chapter 7 bankruptcy?

| Jan 5, 2017 | Chapter 7 |

If you are unfamiliar with the process of going through a bankruptcy in Durham, it may seem confusing and intimidating. Therefore, understanding a little bit about what you will need to qualify for Chapter 7 bankruptcy can help you feel more comfortable. When deciding who is eligible, the bankruptcy court will turn to something known as a means test in order gain an in-depth understanding of your financial situation.

If you pass the means test, you are eligible to file for Chapter 7. If you do not pass, you still have other options according to NerdWallet. Since the test looks only at your finances for the previous six months, you could always wait and try again. Alternatively, you could file for Chapter 13 bankruptcy instead, which will allow you to restructure your debt.

The first part of the means test is based on your income for the last six months. If your level of income is below the average income for your state, you will automatically qualify to file for Chapter 7. Most people who take the test will qualify based on this criterion alone.

However, for those who do not, there is a second step to the process. The bankruptcy court will also take into account your expenses. The burden of reporting expenses accurately falls on you, so be sure to include everything you can think of from living expenses to groceries to your car. Your total income minus your allowable expenses will be your disposable income and if that number is low enough, Chapter 7 may still be an option. This is general information on this topic and should not be considered legal advice.