What Is A Chapter 7 And Who Would Generally Qualify?
In a chapter 7 bankruptcy, or liquidation bankruptcy, any assets you own that are not exempt would be sold by the chapter 7 trustee and used to pay your creditors. However, in practice, very few people have non-exempt assets. This is what is called a No Asset chapter 7 case. There are no assets being disbursed and the end result is the discharge of all debts except those excluded from discharge, such as student loans, most taxes, child support arrearage, and judgments related to driving and car accidents.
The people most likely to qualify for chapter 7 bankruptcy are those whose income is about the same as their living expenses or even less than their expenses. If someone can save money each month, you probably will not qualify for a chapter 7 bankruptcy.
Relieve Yourself From Debt Through Liquidation Bankruptcy
Consult with our bankruptcy lawyer at Flynn Law Firm in Cabot, Arkansas to learn how you can clear your debts by filing a Chapter 7 Bankruptcy petition. You can count on us to provide you with sound advice for your specific legal needs.
A Simple Definition Of The Means Test
This is a way to determine if an individual or small business filing for liquidation bankruptcy is not abusing the Bankruptcy Code. The means test formula was designed to filter out those who can pay off their debts, which makes them ineligible for the application. You can make the necessary calculations yourself for the trial or use a Chapter 7 means test online calculator such as Legalconsumer.com.
A Few Factors To Determine Your Eligibility
Your Household Income
Having a monthly income that falls under the state median makes you qualified to file for Chapter 7 bankruptcy. If you go over this number, you have to calculate your disposable income to test your eligibility.
Your Disposable Income
The means test gets more complex for individuals with a household income that exceeds the state median. Your capability to pay off your debts will be taken into consideration in this situation. The amount of money you have left after paying your essential monthly expenses will come into play. If your disposable income goes over the qualifying percentage, you fail the means test.
Alternatives to Chapter 7 Bankruptcy
Failing the Chapter 7 means test does not denote that you can never file for bankruptcy. This just signifies that you are limited to other options, like Chapter 13 bankruptcy. You need to consult with a licensed lawyer to learn the best legal action for your financial future.
What Is A Chapter 13 Bankruptcy?
Chapter 13 bankruptcy, also known as reorganization bankruptcy, allows those with a steady income to plan to repay their debts over a designated timeframe. Chapter 13 is often chosen by individuals and businesses facing foreclosure or having a lot of assets they want to keep.
Chapter 13 bankruptcy allows you to create a repayment plan you can afford, that lasts about three to five years, and during that time, you would make regular payments to a trustee who sends the funds to your creditors. Filing Chapter 13 will help if you have fallen behind on your mortgage or car payments because it allows you to keep your things while paying off your debt.
By filing for Chapter 13 bankruptcy, you can stop collection efforts and set up a more manageable plan for repaying your debts.
Who Is Chapter 13 Bankruptcy The Best Option For?
Chapter 13 bankruptcy can benefit certain people and businesses that qualify. To qualify, you must have a regular source of income because Chapter 13 allows you to create a repayment plan to pay off debts over time. So, Chapter 13 can provide a more manageable and structured approach to solving your financial worries.
Unlike Chapter 7 bankruptcy, Chapter 13 allows you to keep your things and create a payment plan to repay your debts. This option is good for those with a steady income but can’t meet their financial obligations due to unforeseen circumstances.
Hiring a Chapter 13 lawyer will help protect your assets throughout the process. At the Flynn Law Firm, we will work hard so you get the most out of filing Chapter 13, while also helping you avoid mistakes that could impact your case.