Chapter 7 bankruptcy offers debtors the ability to get a fresh start free of many of the debts that were suffocating them financially. However, not everyone can avail themselves of this option. They must meet a means test in order to qualify.
The means test is an income limit. Debtors who have an income below the line can file for Chapter 7 bankruptcy. Those who do not qualify must file for a Chapter 13 restructuring, where their debts remain, but they have more time to pay.
There are different ways to qualify for Chapter 7 bankruptcy under the means test. One way is to have an income below the median income in Tennessee. The absolute dollar amount to qualify depends on the size of the household. For example, the median income for a two-person household in Tennessee is $66,989.00 per year. If you have children or other dependents, the amount of income permitted increases substantially.
You can also qualify for Chapter 7 under the means test if you have no disposable income after paying certain approved expenses. This test could allow those above the dollar threshold to take advantage of the Chapter 7 fresh start.
Chapter 7 bankruptcy does come at a price. You may need to forfeit control of certain assets to pay back your creditors. However, many debts are completely wiped out once you emerge from bankruptcy. Congress added the means test as part of bankruptcy reform because it believed that certain higher-income households were gaming the system to get maximum relief from debts.
Contact a Memphis Bankruptcy Law Attorney Today
The Hurst Law Firm works with Tennessee households that run into financial trouble. To speak with an attorney, you can send us a message online or call us today at 901.725.1000.