Qualifying for Chapter 7 Bankruptcy
Who is eligible for Chapter 7 bankruptcy in Michigan?
As you may know, not all debtors are eligible to file under
Chapter 7 of the U.S. Bankruptcy Code. Rather, this form of bankruptcy has been
reserved for those who are in dire need of financial relief. Unlike Chapter
13 bankruptcy—which would allow you to restructure your debt and
repay creditors over three to five years—Chapter 7 bankruptcy would
allow you to liquidate non-exempt assets and repay creditors over a very
short period of time.
At the end of your case, the court would then discharge any remaining debts,
effectively freeing you of the legal obligation to repay them. It is for
this reason that the federal government has taken measures to limit the
amount of people who would qualify. Now, you would be required to take
and pass a "means test" in order to prove that your financial situation is serious enough
to warrant an immediate discharge of debt.
What factors will the means test take into consideration?
The means test was designed to limit the amount of people filing for Chapter
7 bankruptcy in the U.S. In order to do so, it takes several different
factors into consideration when determining whether or not the debtor
has enough monthly "disposable income" to repay creditors. First,
the formula was factor in the individual's current monthly income—which
would be one's average income over the six months leading up to their
If their income is above the state's median income, it will subsequently
be determined how much money is being spent on necessary expenses each
month (i.e. mortgage, car payments and basic necessities) and subtracted
from the total amount. If, at this point, their disposable income exceeds
a certain amount, they would be barred from filing under Chapter 7. They
could still choose to file under
Chapter 13, however, as everyone is eligible to file under this chapter.
Wondering if you qualify for Chapter 7? Call our firm today!
If you are interested in filing a Chapter 7 bankruptcy, it is important
for you to retain the help of a Michigan bankruptcy attorney early on
in the process. Since you would be barred from filling under this chapter
if you were to fail the means test, we encourage you to speak with our
firm before taking the test. In doing so, you may have a much better chance
of successfully filing under Chapter 7 and obtaining immediate relief
from your overwhelming debt.
Call today at (888) 258-0651 to take advantage of a free consultation or schedule your first appointment
– we are available on the weekends and in the evening, in addition
to normal business hours.