If you have considerable debt that you cannot pay off, you may consider filing for Chapter 7 bankruptcy. However, you must be eligible to file this way, and you should turn to a bankruptcy attorney for a “means test.” This assessment determines whether or not you have the ability to pay off your debt. If you don’t make enough money to do so, you can file for Chapter 7 bankruptcy. Below is more information about this process, as well as what happens if you aren’t eligible.

When Do You Qualify for Chapter 7 Bankruptcy?

First, your attorney must gather your financial records. They will use your tax forms and bank statements to calculate the money that you earn and spend. They’ll also include your secured and unsecured debts. Then, they will deduct the money you spend each month from your current monthly income, which is calculated as an average of the last six months. The difference that this produces is your disposable income, or the money you can use to pay back creditors. 

After arriving at this figure, your attorney will compare your personal disposable income to the median in your state. If your number is below the median, you will qualify for Chapter 7 bankruptcy. If your income slightly exceeds the median, your case will be subject to additional review, and you may have to pay back some of your debts.

What Happens If You Don’t Qualify?

If your income significantly exceeds the median for your state, the courts will not be willing to liquidate some of your assets to remove outstanding debts. Instead, you must file Chapter 13 bankruptcy for debt relief. This requires you to pay back what you owe, but over a longer period. It also puts a stop to foreclosure proceedings and creditor harassment. For the next three to five years, you must follow a strict repayment plan that the court provides. This money will go toward fulfilling your mortgage dues, taxes, child support debts, and other types of obligations.

If you believe Chapter 7 bankruptcy is the right option for your financial situation, contact Bender & Bender in Wisconsin Rapids, WI. These attorneys will patiently analyze your needs to figure out whether Chapter 7 or Chapter 13 bankruptcy is right for you. With over 35 years of experience, you can trust their advice to guide you toward debt relief. Visit the website for more information about their practice areas. Call (715) 423-4400 to schedule a consultation.