We are considering filing for Chapter 7 bankruptcy. How can we be sure if we qualify?

Since 2005, debtors seeking Chapter 7 bankruptcy are required to pass a means test to qualify. The means test requires a check of your income to ensure that it is below the median in the state where you reside. If your average monthly income is below the state median during the six months prior to filing bankruptcy, you will qualify for Chapter 7. The average is calculated based on the data from the latest census bureau stats as well as the size of your family. The larger your family that you are financially responsible for, the more likely you are to qualify.

If your household income exceeds the state median, the means test computations get more complex. You must now determine whether you have enough disposable income after paying your "allowed" monthly expenses to pay off at least part of your unsecured debts. If your disposable income totals more than a certain amount, you fail the means test and will not be allowed to file for Chapter 7 bankruptcy.

If you do pass the means test, you qualify for Chapter 7 liquidation bankruptcy. Under Chapter 7, the following unsecured debts be ultimately discharged:

• Personal loans
• Credit card debts
• Auto accident claims not involving a DUI
• Medical bills
• Business debts, including leases
• Income taxes that are over three years old
• Past due rent and utility bills

If you wish to reaffirm a debt, such as a home or automobile, you must do so before the discharge occurs. A written reaffirmation agreement must be signed and filed with the court.

Under Chapter 7, you may not discharge the following debts:

• Payments for alimony and child support
• Any recent tax bills
• Criminal fines or restitution required
• Student loans
• Penalties assessed by the government other than tax penalties
• Damages arising form willful or malicious injury to people or their property
• Cash advances made on your credit cards 60 days prior to filing for bankruptcy

Talk with an experienced bankruptcy attorney to discuss how the chapter 7 means test affects your case.