To be eligible to file Chapter 7 Bankruptcy, you must meet several criteria. Your income cannot be over a certain amount, depending on your place of residence and other specifics in the statutorily determined “means test.” You will be denied if you have previously filed bankruptcy within the past eight years.
In order for a bankruptcy lawyer to determine your eligibility, she will need to closely examine the following:
Income – earned or received by you and your spouse in the last 6 months
Expenses – rent, mortgage payments, car payments, medical expenses, etc.
Assets – household items, cars, boats, trailers, real estate
Bank accounts – checking, savings, retirement accounts, CDs
A “means test” is used to determine if you are income eligible to file for a Chapter 7 bankruptcy. If you are not eligible to file for a Chapter 7 bankruptcy, you may be eligible under the guidelines listed in Chapter 13 of the US Bankruptcy Code. The purpose of the means test is to determine whether you have the financial means to pay off your debts without filing for bankruptcy.
Certain people may be exempt from taking the means test—for example, a disabled veteran who incurred a large portion of his debt while he was on active duty. In the state of New Jersey, there are exemptions for a certain amount of money, a house or a homestead, and for cars. There is also a wild card exemption. The federal exemptions may also be utilized instead of the state exemptions, and this will be evaluated by the attorney.
Filing bankruptcy will not release you from your obligation to repay:
Court obligations, i.e., fines, restitution, court settlements
Child support or alimony
Passing the means test would qualify an individual to file Chapter 7 bankruptcy—which would mean that they can file for bankruptcy, but it does not necessarily mean that they should.
Before you settle on bankruptcy, consider other alternatives and discuss all your options with an experienced attorney.
How will you decide if a Chapter 7 bankruptcy is right for you?