Of the two options in bankruptcy, Chapter 7 offers the greatest opportunity for discharge of debts. Changes in the bankruptcy code in 2005, though, made it more difficult for some people to get debt relief through Chapter 7. If you are considering bankruptcy as a solution to your immediate debt problem, your Bankruptcy Lawyer in Prince George’s County can help you determine if you meet the income and means tests for Chapter 7 bankruptcy.
First, your income will need to be at or below the median income for households the same size as yours in your state. Because these guidelines change periodically, your Bankruptcy Lawyer in Prince George’s County will evaluate your income and determine if you meet the qualifications for Chapter 7 bankruptcy or if you may have to pay some or all of your bills through Chapter 13 bankruptcy.
Clients whose income exceeds the maximum limits have to pass the means test. The means test is a calculation that determines whether you have enough income to make the payments in Chapter 13 bankruptcy. Because Chapter 13 rules require that you make and keep payment arrangements with creditors, you may be able to file Chapter 7 bankruptcy if you don’t have enough disposable income to make a payment plan.
Bankruptcy laws allow you to deduct certain expenses from your income to complete the means test. You will be allowed to subtract a reasonable allowance for groceries, utilities, housing and transportation. Whether you qualify for Chapter 7 bankruptcy because your income is below the threshold or because you pass the means test, you will have to complete a mandatory credit counseling before you can file for bankruptcy. There is a second required counseling session near the end of your bankruptcy in which you will learn financial management skills. The court will require proof that you met both of the counseling requirements before your debts will be discharged.
If you have more debt than you can repay, Chapter 7 bankruptcy may be an option for you. Laura Margulies and Associates, LLC can evaluate your income and assets to determine whether Chapter 7 or Chapter 13 bankruptcy is a better choice in your situation.