Determining If You Qualify for a Chapter 7 Bankruptcy

If you are one of the many Americans who find themselves in trouble financially, you may be looking for solutions to the problem. Depending upon your specific situation, bankruptcy may or may not be the best solution for you. You may or may not qualify for Chapter 7 bankruptcy but it helps to have an understanding as to how the system works, especially since the bankruptcy law changes which came down in 2005.

Understanding the Means Test

If you have the wherewithal or means to pay back your debts, then you will not qualify for a Chapter 7 bankruptcy (also called liquidation). Since the new laws in 2005, people are now required to take what is called the "means test."

The initial step on this test is to determine what your average income is from all sources of income that you have over the past six months. The second step is a comparison of the amount determined in step one to this same amount to California's median income level. If your income is lower, then you pass the means test and are eligible to file for a Chapter 7 bankruptcy.

If it is not, and your income is higher than the median in California, then you would progress on to the next step of the means test to find out what your disposable income is. Disposable income is the amount of money you have left over that could be put toward paying off bills after all of your basic expenses are paid. If you have enough left over to pay some or all of your debts, then you would have to file a Chapter 11 bankruptcy. Chapter 11 is a debt restructuring process and enforces repayment of the debts either in part, or in full.

A Bankruptcy Attorney Can Help

The means test is part of the new federal bankruptcy law it is, however, interpreted and applied differently depending upon the location. If you are experiencing financial trouble and are looking for relief in the Orange County area, you should contact an Orange County bankruptcy attorney for help.

At the Law Offices of Bruce C. Bridgman, Esq., we know the laws and can guide you toward the best solution for your specific financial situation. We can help you with debt negotiation, creditor harassment, or bankruptcy. We also offer free consultations and will sit down with you personally to go over your financial details.

Filing for bankruptcy is a detailed process and must be done correctly and according to very specific rules and timetables. Bankruptcy has the power to affect you for the rest of your life and should be done only with those who are experienced and competent in filing. We are here to help you reach your short and long term financial goals and will answer any questions you may have.