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Monday, May 22, 2017

Do I qualify for Chapter 7 bankruptcy?

Not everyone is eligible to have his or her debts discharged under Chapter 7 bankruptcy.  People with larger incomes will not be permitted to use Chapter 7 to eliminate their debts.  The test is that determines who is eligible for this form of protection is called the Bankruptcy Means Test.  The courts consider the petitioner’s income and expenses in order to determine if a petitioner qualifies.  The eligibility requirements vary from state to state.  But, the first step is always to determine whether a petitioner’s median household income is the less than the median income of a household of the same size in that state.  If this is the case, the test is passed and Chapter 7 bankruptcy protection is available.

Even if a petitioner’s income is more than the state’s median income, that person may still qualify for Chapter 7 protection.  If a person has income higher than the state median, the courts then look at how much of that income is disposable.  The court deducts necessary expenses based on regional standards to determine how much money a person has available to pay his or her bills.  Expenses that would reduce a petitioner’s disposable income include, but are not limited to, taxes, health insurance costs, unreimbursed healthcare costs, court ordered payments, child support, childcare, education expenses, charitable contributions, car payments, mortgage payments and costs for the care of an elderly, infirm, or disabled person in the petitioner’s household.  The information needed to make these determinations is submitted to the Bankruptcy Court in Official Form 22A, which is attached to every bankruptcy petition.

In the event that a petitioner does not qualify for Chapter 7 bankruptcy protection, the Bankruptcy Court will not discharge that petitioner’s debts.  Bankruptcy protection may still be available to that petitioner under Chapter 13 which requires making monthly payments and adhering to a strict budget.  There are benefits and drawbacks to filing a Chapter 13 instead of a Chapter 7, but ultimately, those who do not pass the Bankruptcy Means Test may have no choice as to how they choose to file.  A lawyer will help to determine what expenses should be listed on Official Form 22A to make sure that as many options are available to his or her client as possible.


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Serving Southeastern Wisconsin, with offices in Milwaukee and West Bend, Affliated Attorneys, LLC represent clients throughout Milwaukee County, Washington County, Waukesha County, Dodge County, Ozaukee County, Racine County, Sheboygan County, Jefferson County, Fond du Lac County and Walworth County.



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