Whenever I first meet with a potential client for a bankruptcy/debt relief consultation I am always thinking “can this person file for a chapter 7 bankruptcy.” The reason is that a chapter 7 bankruptcy allows for a debtor to discharge most types of debts such as credit cards, medical bills, and repossessions while also stopping garnishments and foreclosures. It is also cheaper for most people to file chapter 7 vs. chapter 13 bankruptcy or debt settlement and the process is completed in the least amount of time (about 90 days). As an advocate who works on behalf of debtors, my goal is to allow my clients to discharge most if not all of their debts as quickly as possible and obtain a fresh start.
In order to qualify to file chapter 7 bankruptcy, a debtor must have a household income that is below the states median income for their family size or they must have additional expenses that would allow them to qualify by passing what is called the means test. The means test is a something that the government came up with in order allow those who are above the median income but have no disposable income in which to pay creditors in a chapter 13 bankruptcy. The means test for most people will not be a factor, but for those above and close to the median income, you may want to start thinking about what additional expenses do you have that could be deducted. Popular deductions are child support, spousal maintenance, out of pocket medical costs, school costs for kids, and other payments on debts owed to the government. You also get a deduction just for having 1 or 2 car payments which always help in reducing a plan payment in a chapter 13 bankruptcy or getting somebody qualified for a chapter 7 bankruptcy.
What debtors have to understand is that the bankruptcy code designed by the government was made to push you into a chapter 13 so you have to repay your creditors rather than allow everybody who is above the median income to file for chapter 7 bankruptcy. The means test can be difficult to pass for some people with minimal expenses so if that is the case other options would have to be explored.
If you have additional questions please contact Symmes Law Group at 206-682-7975