Are you struggling with crushing debt? If so, perhaps you lost your job and endured an extended period of unemployment. Perhaps, you’re an independent contractor and business has been slow. Or, perhaps you went through a divorce or your income was affected by an accident or illness.
Whatever the cause of your debt situation, Chapter 7 bankruptcy may be the answer you’ve been looking for. With a Chapter 7 bankruptcy, debtors are able to literally wipe out or erase many types of debts, such as credit card debt and medical debt – and even old taxes!
If you have a lot of unsecured debt, a Chapter 7 may be able to erase most, if not all of it. The question is, is a Chapter 7 right for you? If so, do you qualify? It all depends on what types of debt you have and whether you meet the “income requirements.”
Though highly appealing, not everyone qualifies for a Chapter 7 bankruptcy; some debtors earn too much money. Essentially, Chapter 7 is reserved for “low-income” filers, or otherwise “debtors who really need it.” Chapter 7 is also suitable for debtors with significant “unsecured debt.”
Passing the Bankruptcy Means Test
In order for a debtor to qualify for a Chapter 7, he or she must pass the bankruptcy “means test.” If an individual or married couple were to pass the bankruptcy means test, their income would have to be below the state’s median income for a household of their size.
If your income is below California’s median income for a household the size of yours, you would automatically qualify for a Chapter 7. For example, if you’re unemployed or underemployed, it may be a no brainer. On the other hand, if your income is too high, you would have to file a Chapter 13 bankruptcy instead.
With a Chapter 13 bankruptcy, debtors enter into a bankruptcy repayment plan where they pay all, or a portion of their debts off over a 3 to 5-year time period. The monthly payment amount depends on the debtor’s debt load and their “disposable income” after paying the basic necessities of life, such as housing, gasoline, groceries, and insurance, etc.
Even if a debtor does not qualify for a Chapter 7 and has to file a Chapter 13, they still enjoy debt relief. With a Chapter 13, the automatic stay takes effect, which stops all collection activity, and the debtor is put on a monthly payment plan they can actually afford – giving them the breathing room they really need.
Looking for a Rancho Cucamonga bankruptcy lawyer? Contact Nguyen Law Group 7 days a week for a free consultation!