How to Qualify for Chapter 7 Disposable Income
If you have taken on entirely too much debt and find yourself unable to manage it, you may consider filing for bankruptcy. A personal bankruptcy may be filed under either Chapter 7 or Chapter 13 of the U.S. Bankruptcy Code. A Chapter 7 bankruptcy is often referred to as a "liquidation bankruptcy." It will require you to liquidate your current non-exempt assets to pay your creditors. Any additional debts that are left over will be discharged by the court. The bankruptcy court will evaluate your assets and your level of disposable income when deciding if you qualify to file under Chapter 7 or Chapter 13.
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Instructions
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Check the median income in your state for households the same size as yours. The U.S. Trustee Program provides an updated list of average family incomes per state as provided by the Census Bureau on its website, located in the Resources section.
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Compare your household's income to the average household income for your state. If your income is below the average, you qualify to file for Chapter 7 bankruptcy. If your income is above the average, you will need to pass a "means test" conducted by the bankruptcy court.
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Calculate your monthly expenses. Include your rent or mortgage payment, utilities, groceries, cost of transportation and any other debts that must be paid each month.
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Subtract the amount of your monthly expenses from your total monthly household income. The amount you are left with is your disposable income.
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Pass the means test if your income is too high to automatically qualify. You will need to prove that your monthly income has been less than $10,950 for the past five years or that your disposable income is less than 25% of your monthly income. Your disposable income is the amount of money you receive each month above the cost of your bills.
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Tips & Warnings
Consider hiring a bankruptcy attorney. A bankruptcy attorney will be familiar with the federal bankruptcy laws and any special regulations or restrictions that may exist in your state.
