Does Chapter 7 Bankruptcy Have Income Limits?

At Liviakis Law Firm, we often receive inquiries from people who are considering filing for Chapter 7 bankruptcy, but are unsure about the income restrictions. This article will shed light on the question, “Does Chapter 7 Bankruptcy have income limits?”

Understanding Chapter 7 Bankruptcy

Chapter 7 bankruptcy, also known as liquidation bankruptcy, is a legal course of action that allows individuals to discharge – or wipe out – many types of unsecured debts. These could include credit card bills, medical expenses, and personal loans.

Income Limits in Chapter 7 Bankruptcy

Yes, Chapter 7 bankruptcy does have income limits. These limits are determined by the “means test.” This test is designed to prevent high-income individuals from filing for Chapter 7 bankruptcy and instead, push them towards Chapter 13 bankruptcy which involves a repayment plan.

The Means Test

The means test considers your income and expenses. If your income is below the median income for a household of your size in your state, you pass the means test and can file for Chapter 7 bankruptcy. If your income is above the median, you must go through further tests considering specified expenses and debt payments.

Exemptions to the Means Test

There are certain exceptions to the means test. For instance, veterans who incurred their debt primarily during active duty or homeland defense activity may be exempted. Also, individuals with debts that are primarily not consumer debts may not have to pass the means test.

Contact Liviakis Law Firm

If you’re considering bankruptcy and unsure whether you meet the income requirements for Chapter 7, it’s crucial to consult with an experienced Modesto bankruptcy attorney. Contact Liviakis Law Firm at 916 459 2364. We’re here to help guide you through the process and clarify any doubts you may have.