People in many different financial circumstances can find themselves dealing with credit or debt issues. There are several kinds of bankruptcy to address household and financial circumstances, but Chapter 7 bankruptcy for individuals can often be the fastest route to a bankruptcy discharge. It does not require a lengthy repayment plan.
Chapter 7 bankruptcy, therefore, has strict limitations regarding both how much income you can currently have when you file and which assets you can protect from liquidation to repay creditors. To pursue a Chapter 7 bankruptcy, you will need to pass a means test. How can you determine if you qualify for a Chapter 7 filing? A bankruptcy attorney can do the calculations once he or she has documentation of your income.
You must compare your income to the state median
The process for means testing is straightforward, although it does involve complicated income adjustments that many people struggle to do on their own. However, once you have adjusted your income for certain allowable expenses, you can then compare it to the current median income for a household of the same size in Illinois.
The data for state income changes frequently. These most recent figures apply to cases filed after May 15, 2021, but will eventually change. Currently, a single person in Illinois must earn less than $58,698 if they hope to file for Chapter 7 bankruptcy. Larger families can exempt even more.
Those with two people in their family can earn up to $77,547, while a three-person family can qualify with an income of up to $92,711. Families with four people can earn up to $108,549, and bigger families can add another $9,000 for each additional family member.
Is Chapter 7 the right kind of bankruptcy for you?
If your income allows you to qualify and you face overwhelming debt or aggressive creditor collection efforts, then Chapter 7 bankruptcy might be a good solution for you. You can protect some of your property while getting rid of your unsecured debts, such as the balances on your credit cards and medical debt.
As soon as you file, the collection efforts will have to stop until the courts resolve your bankruptcy filing. If you are successful, you can look forward to the discharge of the debts, which means you won’t have to pay them off anymore. Learning more about Chapter 7 bankruptcy can help you decide if it would be a good solution for your financial situation. If your income exceeds the median, you can still normally file a Chapter 13 payment plan. Once again the creditors will immediately have to leave you alone and normally you only have to pay a portion of the debt over an extended period of time.