Prior to 2005, anyone whose debts exceeded the value of their assets was eligible to file a Chapter 7 bankruptcy petition. The filer’s income was not directly considered. This lead to many celebrated cases where people with high income filed for Chapter 7 relief and discharged their debts without paying their creditors a dime, even though they had plenty of monthly income and could have repaid some or all of their debt over time. Congress was concerned that this was an abuse of the bankruptcy system, since Chapter 13 existed to enable people to repay some or all of their debt over time.
So, the bankruptcy reform act of 2005 was passed and now requires bankruptcy filers submit a form called the “Means Test” to determine whether you have sufficient disposable income each month to repay some of your debt in a Chapter 13 plan.
In general terms, if your income is below your state average, you are eligible to file a Chapter 7 case; and if your income is above the state average, you must file a Chapter 13 case. There are exceptions, however, and even if your income is above the average, you can still file a Chapter 7 case depending on how much disposable income you have each month; or if you have “special circumstances.” If you are above the state average, we will help you determine if you can still file under Chapter 7 by analyzing your disposable income and exploring your special circumstances, or help you design and file a workable Chapter 13 plan instead.
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