Choosing the Appropriate Time Makes a Big Difference
If you’ve never sought protection under U.S. bankruptcy laws, the first thing you need to understand is that there are two ways to get a fresh start: with a liquidation proceeding under Chapter 7 or a reorganization under Chapter 13. As a rule, you don’t get much choice—you can always opt to reorganize your debts in Chapter 13, but you must qualify to discharge debts in Chapter 7. This is done by submitting to what is known as a “means test.”
Determining Whether You Meet the Requirements of the Means Test
The means test seeks to determine whether you have the income and/or assets to satisfy your creditors in full over a three-to-five year period. If you do, then you cannot discharge debts in Chapter 7.
There is one easy way to determine whether you qualify for Chapter 7 liquidation of debt. Under the bankruptcy code, if your “current monthly income” is less than the median family income in your state, for a family of your size, you automatically qualify for protection under Chapter 7. The U.S. Census annually determines and publishes the median family income on a state-by-state basis. Accordingly, if you fall below the median income requirements, the bankruptcy court won’t look at any other factors to establish eligibility.
Determining your “current monthly income,” though, can be an involved process. It includes all your income for the last six months, from any source, including employment, unemployment, child support, alimony, investments, and insurance payments. The total amount of that income is then divided by six to establish your monthly income.
If your current monthly income exceeds the median, you still may be eligible for Chapter 7, but the calculation becomes far more complex.
Contact Heath, TX Bankruptcy Attorney Carrie Weir
I offer a free initial consultation to all potential bankruptcy clients. Contact my office by e-mail or call me at 972-772-3083 for a private meeting. With offices in Rockwall, Texas, I represent clients in Heath, Greenville, Lavon, Wylie, Mesquite, and Rowlett.
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