After you have determined that bankruptcy is right for you, your next questions is “Can I file bankruptcy?” The answer to this question is almost always yes; the real issue is what type of bankruptcy you can file.
Qualifying for Chapter 7 Bankruptcy:
- Have you received a bankruptcy discharge in the last 8 years? If yes, you cannot file chapter 7 bankruptcy; if you have not received a bankruptcy discharge in the past 8 years you have passed the first step.
- Can you pass the Means Test? To qualify for chapter 7 relief under the U.S. bankruptcy code you must pass what is known as the “Means Test.” The “Means Test” determines whether or not you or your family has sufficient disposable income to repay your creditors. If you fail the test you cannot file chapter 7 and must consider a repayment plan under chapter 13. The “Means Test” is a two phase process. Phase I is simple and simply determines if your families’ income is below the median income level for a family of your size in Florida. If you do not pass Phase I you move to Phase II where the calculations get a bit more complicated.
Phase I: The “Means Test” first determines whether or not your income is greater than the medium income for a family of your size in the state in which you live. The medium incomes for Florida as of April 1, 2015 are $42,718.00 for a single earner, $52,421.00 for two person household, $57,977.00 for three people and $67.539.00 for a family of four. For each family member greater than four you are allowed to add $8,100.00 to your total family income. If your income is less than the medium incomes noted above, you pass the “Means Test” and are eligible for Chapter 7 relief. If not, you must move to Phase II.
Phase II: If your income is greater than the medium incomes noted above, the second phase of the “Means Test” must be performed. In this phase your allowable expenses (as defined by the IRS) are subtracted from your total income to determine your “disposable income.” If you have disposable income over the next 5 years (60 months) will be less than $6,000 (or $100/month), you “pass” the means test and can file Chapter 7. If you have disposable income over the next 5 years is more than $10,000 (or $166/month) you will “fail” the means test and must demonstrate a special need to file for Chapter 7 relief. Having disposable income between $6,000 and $10,000 over the next 5 years requires one more calculation to determine if you can file chapter 7 bankruptcy.
Having disposable income between $100 and $166 per month requires you to compare your disposable income over the next 5 years to the amount of your unsecured and non-priority debts. If your disposable income is greater than 25% of your unsecured debts you will fail the means test and must demonstrate special circumstances to file for Chapter 7 relief. If your disposable income is less than 25% of your unsecured debts you “pass” and can file Chapter 7. Please remember that failing the “Means Test” does not mean you are unable to avail yourself of certain bankruptcy protections, you just cannot file for chapter 7 protection. If you fail the means test, you will still likely qualify for chapter 13 bankruptcy protections.
THE MEANS TEST CAN BE COMPLICATED AND, IN PRACTICE, CAN BE MORE COMPLEX. WE HIGHLY RECOMMEND THAT YOU SPEAK WITH A LAWYER TO DETERMINE IF YOU DO, IN FACT, PASS THE MEANS TEST.
If you pass the Means Test, please read below.
- Have you completed the required credit counseling course? To file for bankruptcy you must first complete a credit counseling course. The course is offered online and takes about an hour to complete. There is no test to pass and we can help get you set up with this course.
If you have passed all three of these elements you are qualified to file Chapter 7 bankruptcy. For more information regarding Chapter 7 bankruptcy, please check out our Chapter 7 Bankruptcy page.
Qualifying for Chapter 13 Bankruptcy:
- Have you received a Chapter 13 bankruptcy discharge within the last two (2) years or a discharge under Chapter 7 within the last four (4) years? If you answered yes to either of these questions, you must wait to file if you would like a discharge; if no, please read below. Note that while you cannot receive a discharge if you file Chapter 13 within two (2) years of receiving a chapter 13 discharge or four (4) years of receiving a chapter 7 discharge, you may want to file anyway to deal with liens that survived your chapter 7 bankruptcy.
- Does your secured debt exceed $1,149,525.00 or your unsecured debt exceed $383,175.00? If your secured debt exceeds $1,149,525.00 or our unsecured debt exceeds $383,175.00 you cannot file a chapter 13 bankruptcy. An example of secured debt is a mortgage, car loan or any debt for which you put up your personal property as collateral. Unsecured debt would be credit cards, medical bills, student loan and any debt for which no collateral was used to acquire the loan. If your debt does not exceed these limits keep reading.
- Are you current on your income taxes? To stay in chapter 13 bankruptcy you must be current on your income taxes and be able to provide proof of filing an income tax return to the trustee. If you are not current on your income taxes and cannot catch up you may have to file for chapter 7 bankruptcy protection.
- Can you keep current on any child support or alimony obligations? Outstanding child support or alimony obligations will not prevent you from filing Chapter 13 but if you cannot keep current and make required payments after you file, your Chapter 13 bankruptcy may be dismissed.
If you pass these tests you will be qualified to file a Chapter 13 bankruptcy. For more information on chapter 13 bankruptcy and how it may help you please take a look at our Chapter 13 Bankruptcy page.
Filing bankruptcy is a serious decision and should not be taken lightly. If you are asking yourself “Can I file bankruptcy”” or if you have any questions regarding bankruptcy or debt relief, Jacksonville’s debt relief lawyer, Matthew C. Bothwell, Esq., is here to help. Please contact me for a FREE INITIAL CONSULTATION.