The decision to seek personal bankruptcy protection in Texas is never an easy one. Yet almost as important as deciding to file for personal bankruptcy is determining which Chapter you will file under.
The most popular form of bankruptcy is Chapter 7 (no doubt due to the fact that this form of bankruptcy allows for the discharge of certain debts). As many of our past clients here at the Law Office of Bill F. Payne, P.C. can attest to, however, not everyone qualifies to file under this chapter. Your ability to seek financial protection under Chapter 7 depends on how your financial situation compares to the means test.
Comparing your situation to others in your state
Per the Administrative Office for the U.S. Courts, the Chapter 7 means test helps to prevent abuse of the privileges that this type of bankruptcy offers. Essentially, the means test looks to evaluate whether you may have the financial resources to repay your debts. It is for this reason that the first step in the means test is to compare your aggregate monthly income to that of your particular demographic in your state. If your income is less than the average for that group, you automatically qualify to file under Chapter 7. If it is not, then you move on to the final step of the test.
Viewing your income compared to your unsecured debts
That involves projecting your monthly income out over a period of five years. If that amount is less than either $12,850 or 25% of your non-priority unsecured debts (provided the cumulative amount of those debts is at least $7,700), then you pass the means test and the court approves your bankruptcy petition.
You can learn more about the guidelines regulating Chapter 7 bankruptcy by continuing to explore our site.