Can I Qualify To File Chapter 7 Bankruptcy?

Since the bankruptcy code change back in 2005 it become more complicated to qualify to file Chapter 7 bankruptcy. In the past, when someone thought of filing bankruptcy they thought of Chapter 7. Now it's not that easy. People that are buried under a pile of credit card bills may not qualify to file Chapter 7 bankruptcy unlike before. Prior to 2005, Congress felt that too many Americans were abusing the bankruptcy system and they needed to make changes to fix that. When you hear the other side of the coin, it was more about the lobbying going on from the credit industry to make the changes to the bankruptcy code and not abusive bankruptcy filings.

Now, if a person wants to file for bankruptcy under Chapter 7 they will have to pass a means test. Basically, the means test uses the individual’s income, expenses and compares it to the median income chart for the individual state. How it works is the debtor is required to show the last six months income for their household, then divide it by six and multiply that by 12. The look back period that the court uses is the month prior to filing for bankruptcy and back six months. This will give the average income for the year for the debtor. Next, the debtor will compare their average household income against the median income chart for the individual's state. If the individual filing for bankruptcy falls under this number they have passed the first step of the means test. This still doesn't mean they qualified. Now the debtor will be required to fill out a monthly household expense report. After adding up all the bills for the month they need to deduct this amount from the average monthly income. If the debtor has more than $170 left over at the end of the month they will not qualify to file Chapter 7 bankruptcy.