Don’t Underestimate the Chapter 7 Means Test

It doesn’t take a lot these days to find yourself in financial trouble. The sudden onset of an unexpected medical condition, the loss of a job, and other unexpected expenses like home repairs can leave you struggling to make ends meet. Many people in the Owensboro area who find themselves in this position do everything they can to escape their debt trap, which is a struggle that can take years, decades, or a lifetime to rip free from. Some are never able to claw their way back to financial freedom.

As scary as that may sound, there’s good news: you don’t have to fight for years to obtain debt relief. Instead, you can seek the fresh financial start you deserve by pursuing personal bankruptcy. Chapter 7 bankruptcy, when successful, allows you discharge most, if not all, of your debts by liquidating some of your assets to pay off creditors. Then, once that process is complete, any remaining debt may be forgiven. But not everyone qualifies for Chapter 7 bankruptcy.

This is because the federal government requires those seeking Chapter 7 protection to pass a means test. The first part of the means test assesses your household income to determine whether you are below acceptable limits. The threshold in Kentucky is a little more than $40,000 per year and increases with each additional person in the household. If your income is below that number, then you will automatically be eligible to pursue Chapter 7 relief.

Even if your income is above the threshold, though, you might still qualify for Chapter 7 bankruptcy. In order to qualify, though, you’ll have to demonstrate how your expenses reduce your disposal income to a very low level. So low, in fact, that a Chapter 13 repayment plan wouldn’t be an effective way to settle debt claims.

Most people pass the means test, but it’s still a crucial step that you need to handle carefully, especially if your income is above the threshold. If you think that you could benefit from assistance with this process, as well as the other issues that often accompany bankruptcy, then consider speaking with an experienced bankruptcy attorney. By doing so, you might set yourself on a path toward reclaiming your financial health.

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