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Qualifying for Bankruptcy

If you are overwhelmed with the amount of debt you have, bankruptcy may be the answer to a new financial start and higher quality of life. In the event that you do decide that bankruptcy makes sense for your situation, you should understand more about bankruptcy, and how qualifying for bankruptcy works.

At Cleveland Bankruptcy Attorneys, we have years of experience guiding clients in Chapter 7 and Chapter 13 bankruptcy cases and can help you determine which type of bankruptcy for which you may be eligible. Call a Cleveland bankruptcy lawyer at our firm today at (216) 586-6600, or contact us online for a free consultation.

Chapter 7 Bankruptcy Requirements

During Chapter 7 bankruptcy, a bankruptcy trustee will liquidate your assets and distribute the proceeds amongst your creditors. Some of your assets in a Chapter 7 case will be considered exempt assets, meaning you will have the right to keep them.

To find out whether you qualify for Chapter 7 bankruptcy, you will be required to take a means test. The means test was designed to prevent bankruptcy filers with higher incomes from filing for Chapter 7 bankruptcy. It will reveal whether your income falls below the median income for an individual or family of your size in Ohio. Although the complete means test involves multiple steps, the majority of filers do not have to go beyond the first one to determine their eligibility.

The first step will compare your monthly income to the median Ohio income for an individual or a family of your size. If your income falls below the median, you will likely qualify for Chapter 7 bankruptcy. In the event that your income is above the median, your financial circumstances may still allow you to qualify.

You will need to complete the entire means form test to determine whether you have enough disposable income left, after paying your monthly expenses to pay off your unsecured debts. If you do, then you may be eligible for Chapter 13 bankruptcy rather than Chapter 7.

Exemptions for the Chapter 7 Means Test

Almost everyone who would like to file for Chapter 7 will need to go undergo means testing. However, there are some exemptions. You will not have to take a means test if:

  • Most of your debt is business, tax, or other non-exempt debt
  • You are a disabled veteran.
  • You are a member of the National Guard who is on active duty and has been activated for a minimum of 90 days.

Chapter 13 Bankruptcy Requirements

If you are not eligible to file for Chapter 7 bankruptcy, you will probably qualify for Chapter 13 bankruptcy. The purpose of the Chapter 13 means test is to figure out whether your case should be three or five years and how much your unsecured creditors must receive over that time period. For 2017, you should qualify for Chapter 13 bankruptcy if you have regular income and your unsecured debts are less than $360,475 while your secured debts are less than $1,081,400.

It’s important to note that these numbers are adjusted on occasion and based on the cost of living in the United States that is reflected by the Consumer Price Index. Another requirement you must meet in order to file for Chapter 13 bankruptcy is that you must have received credit counseling within the 180 days before you file your bankruptcy petition.

With Chapter 13 bankruptcy, you’ll be able to pay back the debt that you can afford since your monthly payment will be based on your income minus your living expenses. You can inform your creditors of how much you can afford to pay back instead of allowing them to dictate your monthly payment. Filing for Chapter 13 bankruptcy can also give you the opportunity to prevent your home from being foreclosed and your car from being repossessed.

Why Speak to an Ohio Bankruptcy Lawyer

The Ohio bankruptcy lawyers at Cleveland Bankruptcy Attorneys understand that it can be difficult to understand the means tests for Chapter 7 and Chapter 13 bankruptcy. Therefore, we are committed to walking you through the steps to determine if you qualify for bankruptcy. You can count on us to ensure the means test is conducted properly and the correct expenses are deducted from your income.

In addition, we’ll educate you on the differences between Chapter 7 and Chapter 13 bankruptcy, determine which option is right for you, and answer any questions you may have.

Call Cleveland Bankruptcy Attorneys

If you believe that bankruptcy may be the solution to your financial problems, it is in your best interest to call Cleveland Bankruptcy Attorneys for a free case consultation with an experienced Cleveland bankruptcy lawyer. Call us at (216) 586-6600, or contact us online for a free case consultation.

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