Are you looking for a way to get rid of your debts and start your financial life afresh? In this case, Dallas based law firm Recovery Law Group lawyers say, bankruptcy is the best way to do this. Individual debtors have the option of choosing from chapter 7 or chapter 13. Chapter 7 gives you a faster discharge of unsecured debts, however, you need to qualify for it, as it is meant to provide a fresh start for people with little to no income. Experienced bankruptcy attorneys at 888-297-6023 can help you find out whether Chapter 7 will suit you or not.
Who can file for chapter 7 bankruptcy?
Prior to bankruptcy filing (180 days), you need to complete a mandatory credit counseling course. Additionally, you need to provide information regarding current monthly income and means test calculation. To qualify for this chapter, your monthly income should be less than the average income of the state for a household of a similar number of members. The monthly income is calculated by adding any income obtained for previous 6 months from these sources:
- Gross wage, salary, bonus, overtime, tips, commission, etc.
- Any money received for household expenses including child support, alimony or maintenance.
- Pension or retirement income (except social security)
- Unemployment payments (except social security benefits)
- Any income from interest, royalties, and dividends.
- Any income from rental properties, business, profession or farm.
Income from other social security and other income are not included in monthly income. Once the monthly income is calculated it is compared to the median family income of the state. if monthly income is higher than the median, means test is used to find your eligibility for this chapter of bankruptcy.
In case your monthly income exceeds the state median income, then means test calculation is done to see whether they can opt for chapter 13 or not. this is done by deducting expenses from your monthly income which include:
- Standard IRS deductions claimed
- Mortgage or rent
- Spouse’s income not used for paying household expenses
- Health care allowance
- Food, clothing and other household expenses
- Utility expenses including operating cost and insurance
- Local and public transport expenses
- Vehicle costs (ownership or lease expense)
- Taxes (local, state and federal)
- Insurance for life term policies, insurance (health, disability) healthcare expense not covered by insurance
- Education and childcare expense
- Mandatory payments (child support and alimony)
- Payroll deductions (union dues, retirement contributions, uniform costs, etc.)
- Debts for mortgage and car payments
Once these expenses are deducted, if the monthly income is less than $12,850 (or less than 25% of your unsecured debts) then you can pass a means test to qualify for chapter 7 bankruptcy.