Qualifying for Chapter 7 Bankruptcy
November 21, 2014
A Macomb County Bankruptcy Attorney Guides Individuals Through the Qualification Process
All too often, people do not even consider filing Chapter 7 bankruptcy simply because they still earn an income and assume they do not qualify. Others believe they cannot file because they have too much debt — or not enough. The fact is that qualifying for Chapter 7 involves many considerations, known as a “means test,” which is based on where you live. Many individuals are surprised to learn that they can obtain the fresh start they need through the simplest form of bankruptcy.
How Bankruptcy Law Defines Qualification
The law does not require consumers to be destitute to file for Chapter 7 bankruptcy protection. The U.S. Courts apply a fairly generous set of rules when determining whether individuals can qualify, including the following:
- First, they look at median income, which includes considerations for household size, and allowances for basic and special expenses. This basic means test is the primary consideration for qualification.
- The law does not consider the amount of debt, and the solvency or insolvency of applicants has little or no bearing on qualification.
- Anyone filing for bankruptcy must complete approved credit counseling within 180 days before filing.
Means Tests Vary by County
Depending on where you live in Michigan, typical incomes and expenses are different. This is why location is the first consideration when determining whether individuals qualify to file under Chapter 7. Naturally, a means test must also consider the details of each living situation. To illustrate, we can look at a typical example from Macomb County:
- A family of three may qualify for bankruptcy with a monthly income of $5,000 or more, while the same income for a single-person household would not typically qualify — unless the applicant has other expenses that stretches the income too far.
- The test also looks at expenses such as housing and utilities, allowing a specific amount based on household size. For the family of three, those expenses might be between $500 and $600.
- Expenses for mortgage payments or rent are also considered. The three-person family may qualify for over $1,200 in allowances for rent or even more to cover the full amount of mortgage payments.
- Additional expenses that might qualify an applicant include a variety of items, from food and clothing to emergency needs such as medical care.
The bottom line is that no one who is currently struggling to stay afloat financially should ever assume that Chapter 7 bankruptcy is not an option. The means tests can be complex, but an experienced bankruptcy attorney understands the qualification process — and makes sure clients consider every detail needed to help obtain the fresh start they need.
Getting on Track May Be Easier Than You Think
Whether you live in Macomb County or anywhere in Michigan, advice from an experienced Macomb County bankruptcy attorney can make the difference between struggling to get your finances under control or addressing your issues quickly and easily. With more than 20 years of experience, the Law Office of Jeffrey J. Randa knows how to assess the details of your specific situation to offer the right solution for you.
Call us at 586-228-6523, or use our convenient contact form to get the process started.