What income qualifies for Chapter 7?
If your annual income, as calculated on line 12b, is less than $84,952, you may qualify to file Chapter 7 bankruptcy. If it’s greater than $84,952, you’ll have to continue to Form 122A-2, which we’ll review in the next section. It should be noted that every state has different median income calculations.
What is considered disposable income in Chapter 7?
Disposable income is the amount that remains after subtracting allowed bankruptcy expenses from your monthly gross income. Your disposable income will determine whether you qualify to discharge (wipe out) debt in Chapter 7 or Chapter 13 bankruptcy.
Can you keep your tax refund after filing Chapter 7?
Any return that results from income earned after filing for bankruptcy is yours to keep. A tax refund that’s based on the income you earned before filing will be part of the bankruptcy estate no matter if you receive it before or after the filing date. Tax refunds go to the estate.
Can you make too much money to file Chapter 7?
One of the most common myths about bankruptcy is that high income debtors earn too much to file bankruptcy. But the truth is that no matter how much you earn, you may qualify for Chapter 7 or Chapter 13 bankruptcy based on your financial situation.
What is the means test for Chapter 7 bankruptcy?
When you file for Chapter 7 or Chapter 13 bankruptcy, you must compare your family income to the median income in your state for the same household size. In Chapter 7 bankruptcy, this is an important part of the means test—the test you must pass to receive debt forgiveness (a discharge).
How is income calculated in Chapter 7 bankruptcy?
For example, someone filing Chapter 7 bankruptcy in July calculates their current monthly income based on how much they earned from January 1 to June 30. Step 1: Add up all income from the last 6 months. Your monthly income is calculated by adding up all countable gross income you received in the 6 month period you’re using for your means test.
Do you have to pass the means test to file Chapter 7?
The first step is simple: If your current monthly income is less than the median income for a household of your size in your state, you pass. You’re done. You do not need to complete the rest of the means test. You can file for Chapter 7.
When do you qualify for Chapter 7 bankruptcy?
You pass the Chapter 7 means test and qualify for Chapter 7 bankruptcy. If your household income is greater than the median, you may still qualify for Chapter 7 bankruptcy, if your household expenses under means test calculation don’t leave you with any disposable income. More on that in Part 2, below.
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