In Louisiana, your income plays a pivotal role in determining your eligibility for personal bankruptcy. The type of bankruptcy you qualify for, whether it’s Chapter 7 or Chapter 13, is largely influenced by your income level. This determination is made through a process known as the “means test.”
The means test is a calculation that compares your average monthly income, over the six months prior to your bankruptcy filing, to the median income for a household of your size in Louisiana. If your income is below the median, you may qualify for Chapter 7 bankruptcy, which can provide a complete discharge of many types of unsecured debts.
However, if your income is above the median, the means test will further analyze your disposable income, which is your income after subtracting certain allowed expenses. If you have sufficient disposable income to repay a portion of your unsecured debts, you may not qualify for Chapter 7 bankruptcy. Instead, you may be eligible to file for Chapter 13 bankruptcy, which involves a repayment plan over three to five years.
It’s important to note that the means test is not the only factor in determining eligibility for bankruptcy. Other factors, such as your total debt, the types of debt you have, and your long‑term financial goals, also play a significant role. Therefore, it’s crucial to consult with a knowledgeable bankruptcy attorney to understand all of your options and make the best decision for your financial situation.
How is the means test used to determine eligibility for Chapter 7 bankruptcy in Louisiana?
The means test is a crucial factor in determining eligibility for Chapter 7 bankruptcy in Louisiana. It is designed to evaluate your income and assess whether you have the means to repay your debts. The means test involves comparing your average monthly income to the median income for a household of similar size in Louisiana.
If your income falls below the median income, you automatically qualify for Chapter 7 bankruptcy. This means that your income is considered low enough that you are presumed to lack sufficient disposable income to repay your debts. Passing the means test allows you to proceed with Chapter 7 bankruptcy, which typically results in the discharge of most of your unsecured debts.
If your income exceeds the median, further analysis is required. Deductions for specific allowed expenses are subtracted from your income to calculate your disposable income. The disposable income amount is then evaluated to determine if you still qualify for Chapter 7 bankruptcy. If your disposable income is below a certain threshold, you may still be eligible for Chapter 7.
Navigating the means test and understanding its implications on your eligibility for Chapter 7 bankruptcy can be complex. It is essential to seek guidance from experienced bankruptcy attorneys at Simon Fitzgerald, LLC. Our attorneys will thoroughly assess your income, expenses, and unique financial circumstances to determine your eligibility and guide you through the bankruptcy process.
How does my income affect the payment plan structure in Chapter 13 bankruptcy in Louisiana?
In Chapter 13 bankruptcy, your income plays a crucial role in determining the structure of your payment plan. Chapter 13 bankruptcy, also known as “reorganization bankruptcy,” involves creating a repayment plan to pay off a portion or all of your debts over a specified period, typically three to five years.
Your income is a key factor in calculating the disposable income available for debt repayment. The payment plan is structured based on your income, expenses, and the types of debts you have. Your income level helps determine the monthly payment amount and the duration of the repayment period.
If you have a higher income, you may be required to contribute more towards your debts. The payment plan aims to distribute your disposable income fairly among your creditors while allowing you to manage your financial obligations.
Working closely with experienced bankruptcy attorneys at Simon Fitzgerald, LLC is crucial in determining the optimal payment plan structure based on your income and financial circumstances. Our attorneys will analyze your income, expenses, and debts to develop a feasible repayment plan that aligns with your financial situation and maximizes your chances of successful debt repayment.
For more information on bankruptcy basics, you can visit: Experian ‑ What Are the Requirements for Bankruptcy?
Unsure if you meet the income requirements for bankruptcy? Our FAQ guide has all the answers you need. And if you have a tough question, don’t hesitate to reach out to our bankruptcy experts. When you’re ready to take the next step, check your eligibility here.