In order to qualify for a Chapter 7 bankruptcy in California, a debtor must prove that they do not have the means to repay their debts. This is known as passing the “means test.” There are two different ways to qualify for chapter bankruptcy by passing the means test: either by proving that your income is below the California median or by comparing your income to your expenses in a “full means test.” If you do not qualify for a Chapter 7 bankruptcy under either test, you may need to file under a different Chapter of the Bankruptcy Code or exploring other options for debt relief.
The median income test is a simple comparison: does your household income exceed the median household income in California for your household size? The median income list is frequently updated. It also compares household income based on household size, so that larger household incomes can be offset when there are more people living in your home.
If your income exceeds the current median income, it is still possible to qualify for a Chapter 7 bankruptcy. This is done via the “full means test.” In a full means test, the debtor’s income and expenses are compared to see if there is sufficient disposable income to repay debts. This is a good option for those in unique circumstances. If, for example, you have a disabled child who requires expensive care, a large portion of your income might be allotted to those payments. You have the right to prove that these expenses reduce your disposable income that is available to pay debts.
Even if you do not qualify under either test, it can still be possible to file for bankruptcy. For example, in a Chapter 13 bankruptcy, the means tests are less restrictive, but in exchange, you must follow a repayment plan for a set portion of your debt. Chapter 13 is not right for everybody. It is, however, a possible option to explore.
There are also exemptions to the means test (for example, for qualifying disabled veterans). Finally, it is sometimes possible to negotiate reduced payments with your creditors. Many creditors would rather receive a cash payment for a small portion of their overall debt than to have the entire debt discharged in bankruptcy.
A quick internet search for “California Chapter 7 bankruptcy lawyers near me” will show many results. The best lawyer for you is the one with experience handling your type of case. The experienced bankruptcy attorneys at Miranda, Magden & Miranda have years of experience helping clients obtain debt relief through Chapter 7 bankruptcy. Contact us today to schedule a consultation. The sooner you have a debt relief attorney on your side, the sooner you can get a fresh start for your financial future.
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