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Determining Chapter 7 eligibility with the bankruptcy means test

If you count yourself among the many people across Virginia who are dealing with overwhelming debt and considering filing for bankruptcy, you may have heard the terms “Chapter 7” and “Chapter 13” thrown around. You may not know exactly how they differ, though, or whether you are eligible to file for bankruptcy through either method. At Ferriswinder, PLLC, we understand how the bankruptcy means test determines Chapter 7 eligibility, and we have helped many clients find bankruptcy solutions that meet their specific needs.

Per the U.S. Department of Justice, most people who choose to file for bankruptcy relief must first fill out Bankruptcy Form 122, which will ultimately determine whether a debtor has the option to seek relief through a Chapter 7 bankruptcy. This involves gathering comprehensive documentation about your income from the last six months to determine whether your household income falls below the average household income in Virginia.

If your household income falls below this threshold, you can automatically pursue relief through a Chapter 7 bankruptcy. If it does not, you may still be able to seek relief through a Chapter 7 bankruptcy, but it will require some additional work. You will have to secure thorough documentation about your expenses from the last six months to determine if you have enough “disposable income” to pay back some debts through a Chapter 13 bankruptcy.

If not, you will typically qualify for Chapter 7 bankruptcy, even if your household income is higher than your state’s average. If the test determines you have enough disposable income to pay back some debts, you may want to move forward with a Chapter 13 filing. More about bankruptcy is available on our web page.

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