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Eligibility to file for Chapter 7 and the means test

Texas residents who are confronted with financial struggles might not want to consider bankruptcy, but it is often the most feasible way to get back into a better position and move forward. When thinking about filing for Chapter 7, there are certain rules that must be followed and criteria that must be met to successfully proceed. It is necessary to follow the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. Under this law, only those who earn less than the median amount in their state are able to file for Chapter 7 bankruptcy.

It must also be remembered that a person who filed for bankruptcy and received a Chapter 7 discharge in the previous eight years cannot file for Chapter 7 again. The law will require that a means test be used to decide on eligibility. The court will take a formula that subtracts the costs for food, rent, mortgage and other necessities that Internal Revenue Service guidelines are used to calculate and will decide whether the monthly income falls below $100.

In the event that the income is less than $100 each month, it is possible to file for Chapter 7. Those whose income is between $100 and $166 per month will have other factors weighed to determine eligibility. The court will conclude the percentage of unsecured debt that could be paid off with disposable income over five years and decide whether a Chapter 7 or Chapter 13 bankruptcy is applicable. Those whose incomes surpass $166 per month will have to use Chapter 13 and not Chapter 7.

With Chapter 7, there is a way for those who qualify to get out from under overwhelming debt and financial challenges to restart their lives. Speaking to a legal professional with extensive experience in assisting clients to pursue a Chapter 7 bankruptcy can be the first step to a new financial life.

Source: americanbar.org, "Bankruptcy -- 'Straight' Bankruptcy: Chapter 7 -- How does the means test work?," accessed on Feb. 16, 2016

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