As a resident of Michigan or Illinois who finds yourself facing an increasingly overwhelming amount of debt, you may be weighing your options and trying to determine the best and most effective way of rebuilding your financial affairs. At Pond Law Firm, we understand that, for some people, filing for bankruptcy can streamline the process of rebuilding your finances and getting your life back on track, and we have helped many clients facing similar circumstances take steps to start the process.
Most consumer bankruptcies fall into one of two categories: Chapter 7 bankruptcies and Chapter 13 bankruptcies. Ultimately, per Nerdwallet, whether you will be able to move forward with a Chapter 7 bankruptcy will depend on whether you meet the eligibility requirements outlined by the bankruptcy means test. Just what is the means test, and how does it work?
Chapter 7 bankruptcies can help those with limited incomes get fresh starts, while Chapter 13 bankruptcies typically require you to pay back at least some of the debts you owe. You cannot, however, pursue a Chapter 7 bankruptcy unless you first pass the means test. The first step in doing so involves comparing your household income (from the past six months) against your state’s median income. If it is lower, you automatically pass the means test and can move forward with a Chapter 7 filing.
If your income is higher than your state’s median income, this does not automatically mean you are ineligible for a Chapter 7 filing, but you will need to gather more documentation about your finances to determine whether you have too much “disposable income” available to you to do so. You can find out more about Chapter 7 bankruptcy by visiting our webpage.