Chapter 7 bankruptcy gives eligible borrowers the chance to eliminate most unsecured debts, but there are certain criteria to meet. One of the most important hurdles is the means test, in which the trustee examines your finances to ensure you actually can’t meet your financial obligations. To determine eligibility, the court will factor in all of your income, minus any reasonable living expenses. Find out more about the process in the guide below.
The Means Test
In most states, if you earn less than the median income, you’re automatically eligible to file for chapter 7 bankruptcy. Otherwise, your attorney will need to show that your financial distress makes it impossible to pay your bills. This involves calculating all of your income, then subtracting all reasonable and allowable expenses.
What Is a Reasonable Expense?
Bankruptcy guidelines regarding household expenses are quite broad, including your rent, mortgage, and utility payments. The costs of internet, cable, pet care, car payments, and insurance are also considered reasonable and allowable expenses. You may be able to deduct your health and auto insurance, car payments, and any taxes not discharged in your bankruptcy as well. Other debts that can’t be included in your petition, like student loans and back child support, will be deducted from your income too.
How an Attorney Can Help
Passing the means test can be stressful and difficult without the help of a skilled attorney. Your lawyer will review your financial records, determine whether you need to take the means test, and prepare all the documentation for you. They’ll also ensure all of your debts are included, increasing your chances of a successful chapter 7 bankruptcy.
If you’re struggling with debts you can’t repay, Greg Dunn, Bankruptcy and Debt Relief Attorney, will help you file for bankruptcy. Since 1996, he’s helped over 12,000 people throughout Honolulu eliminate burdensome debt to get a second chance at financial stability. Visit the website for more information on filing for chapter 7 bankruptcy, and call (808) 524-4529 to schedule a free initial consultation today.