Without a doubt, the first question I am usually asked by a potential client is: do I qualify to file for bankruptcy. Now, there are several different chapters under which a bankruptcy can be filed, but we will be focusing on the most common filing chapter; a chapter 7 (liquidation).
Bankruptcy laws are found under title 11 of the United States Code. This section is further divided up into chapters and it is under these chapters that people determine what type of bankruptcy filing they desire to pursue. Chapter 7 refers to liquidation of debts, meaning that all discharged debt will become non-collectable upon the discharge of the debtor from bankruptcy.
To determine whether or not a person qualifies to file for bankruptcy under chapter 7, the courts use a means test, based upon the median income of each state, to determine if a person has sufficient funds to repay the debt they have acquired. If a person is below the median income threshold, then they automatically qualify and no further analysis is needed. If the person's income is above the median income for their state, then a further analysis as to income versus debt is needed. Not everyone qualifies for a chapter 7 filing, as a result.
Effective May 1, 2012, the courts have adjusted the median income for chapter 7 filers. The median income has gone up in California, meaning that more people will now qualify to file, if they need to do so. The increase ranges from $125.00 per month to $197.00 per month, depending upon the number of household members. If you have been thinking about filing but are unsure if you qualify, now may be the time to pursue a bankruptcy filing.
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