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Chapter 7 Bankruptcy: Just Right to Solve Your Financial Woes

America sits on the horizon of a new financial crisis, analysts say. Since the emergence of the Great Recession, American wages and income remain stagnant, the cost of living continues to soar and consumer debts mount to historical heights. In fact, TransUnion —one of the top credit reporting bureaus — estimates that the average consumer’s credit card debt could increase by about 8 percent by end of the year. If it does, credit card debt will reach the highest level in four years. You may find it difficult to control your finances. Filing bankruptcy may be your solution to wipe out high debt.

Qualifying for Chapter 7

The Chapter 7 bankruptcy process liquidates some of your property and assets to pay off your debt. Therefore, consumers with modest incomes and minimal assets benefit most from this type of bankruptcy. To qualify for a Chapter 7 you must satisfactorily pass the bankruptcy means test. The means test determines your total household income from the previous six months then compares it to the local median income of the same sized household. If your income is higher than the statutory level, then the means test presumes that your income is sufficient to repay most of your unsecured debts by filing a Chapter 13 reorganization bankruptcy instead of Chapter 7.  

Part 2 of the means test

Try not to worry if your income level surpasses the median. The second tier of the means test allows you use specific deductions to rebut the presumption. The allowable deductions are similar to those found on standard IRS tax forms. The means test deductions include:

  • Expenses for standard living
  • Expenses for transportation and housing
  • Miscellaneous necessary expenses
  • Secured debt payments
  • Priority debt  payments

In addition to deductions, you may also apply for special circumstances to further reduce your income. Those who do not pass the means test may still file bankruptcy under Chapter 13 and reorganize of their debt through a debt repayment plan.

A Los Angeles Chapter 7 Bankruptcy firm helps consumers find debt relief through bankruptcy.  Our firm represents clients in difficult financial situations that other law firms turn down and help you find debt relief solutions. Contact the Law Offices of Michael Jay Berger for free debt evaluation.

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