As you contemplate the decision to seek bankruptcy protection in Louisiana, one of the most important choices you will make throughout the entire process is what chapter you will file under. Like most of the clients that we here at Simon Fitzgerald LLC work with, your desire to seek bankruptcy protection does not come from wanting to avoid repaying your debts; rather, you simply hope to re-establish yourself on firm financial footing.
A Chapter 7 bankruptcy certainly offers this potential. Given that this form of bankruptcy offers the potential for the complete discharge of certain, it may come as little surprise that this is the most popular form of personal bankruptcy. Yet do you qualify?
Chapter 7 bankruptcy criteria
Federal lawmakers certainly do not want people to try to abuse the benefits that a Chapter 7 bankruptcy offers. Thus, a set of criteria known as the Chapter 7 “means test” exists to determine who may qualify. The first step in the means test is reviewing your monthly income. If it is below that of your particular demographic in the state, then the test is over; you immediately qualify. If it is not, however, then authorities project your income out over a period of five years. According to the Administrative Office of the U.S. Courts, if that amount is more than either $12,850 or 25% of your non-priority unsecured debts, then you fail to qualify for Chapter 7.
What if you do not pass the means test?
Failing the means test, however, does not mean that personal bankruptcy is not an option for you. Rather, the court simply may require that you convert your petition over to a Chapter 13 (which requires that you repay a portion of your debts over three-fives years).
You can find more information on Chapter 7 bankruptcy throughout our site.