An Oak Park bankruptcy attorney discusses what determines the eligibility for bankruptcy. There are many things that determine your eligibility for bankruptcy. In so many things that it would be hard to answer this question in the limited amount of time that we have. However, the most important thing to know when filing a Chapter 7 or 13 bankruptcy is what is called the means test. The means test is part of the bankruptcy petition and it is a formula that determines whether or not a person is eligible for bankruptcy. The means test is a complicated formula that takes into consideration the income, expenses and the deductions that one can take to limit their income and reduce their income in order to qualify for bankruptcy.
So when determining whether or not you are eligible to file bankruptcy under Chapter 7, the income of the debtor must be lower than the expenses for the debtor. These expenses do not mean expenses for credit card bills, medical bills or things like that. These are the reasonable living expenses that the bankruptcy court sees as your expenses needed in order to live. If one determines that the income and expenses are less than the reasonable living expenses, then you have satisfied just one part of the many parts to determine whether you are eligible for a Chapter 7 bankruptcy.
So after determining the income and expenses portion, you would have to look at the median household income of the debtors. This information is provided by the court and is often in the bankruptcy news. So if the debtor has a wife or a husband and two kids, then those two kids who must live in the household or must be a dependent of the debtor’s, the debtors will have a household of four people. So you would have to take the median gross income determined by the IRS and what the federal bankruptcy court decides is the median household income of the area of which you are filing.
So if the debtor is under the median household income, then they will be eligible for a Chapter 7. Even if the debtor is above the median household income, there are still ways that the income can be lowered by running the numbers through the means test formula. The means test will have certain deductions that the debtor will be able to use in order to reduce that median household income.
So when determining the eligibility of a person for bankruptcy in either a Chapter 7 or bankruptcy Chapter 13, one really has to look at the income and expenses as well as the means test formula. This will be a complicated procedure for anyone, whether they are an attorney or a layperson in determining whether they have a Chapter 7 or Chapter 13 bankruptcy on your hands.
So the best thing to do is to go to your attorney and consult with an attorney and decide whether or not you are eligible for a Chapter 7 or a Chapter 13. And if you are not eligible for a Chapter 7 and they are eligible for a Chapter 13, the attorney will know the best way to propose the Chapter 13 payment plan for the trustee.
These are the best things that determine the eligibility of bankruptcy for somebody. Those three things plus many, many other things that could play a role and a factor in whether or not you are eligible for a Chapter 7 such as previous bankruptcies or assets that could not be protected or certain financial planning for the future that someone may have, if they do not want to give up assets or things of that nature.
So in order to determine if someone is eligible for bankruptcy, it is a long process. However, it can be done with the cooperation of the debtors with their bankruptcy lawyer and fully disclosing all of the information that will be needed for that attorney to make the determination of eligibility for a person who is thinking about filing bankruptcy.