Chapter 7 Bankruptcy Eligibility

Chapter 7 Bankruptcy

Most bankruptcy clients  want to file a Chapter 7 Bankruptcy which discharges debt without a payment plan. It’s a fairly fast and inexpensive way to shed debt and get a fresh start. In most cases, it takes about three or four months from filing to finish and half of this time waiting for the discharge order to come in the mail. 

However, eligibility for Chapter 7 consumer bankruptcy filers is determined by both income and number of persons in the household. For a single person in Michigan as of May 1, 2019, if you are under  the median income of $51,4015 annually, you are eligible. For a household size of two, it is $62,618. The income threshold increases for each additional household member. 

To determine income, we need your last six months of pay stubs and proof of any other household income. If your income is less than the median income for your household size, you can file a Chapter 7. 

Chapter 7 Means Test

If your income for your household size is greater than your median income level, it does not automatically disqualify. Instead,  we calculate income using the “means test.” The means test allows you to deduct certain expenses from your gross wages. These deductions may reduce your income for Chapter 7 eligibility purposes. 

I would like to stress that not every bankruptcy lawyer knows how to do the means test properly. If you are over income and would like to file a Chapter 7, it is critical that your lawyer knows exactly how to deduct every allowable expense. 

Any questions? Give us a call at 313-291-0240.

Chris McAvoy is a  Michigan attorney who helps people with bankruptcy, divorce, and estate planning. To find out more or set up an appointment, click here for contact info. Our attorneys help people in Taylor, Allen Park, Southgate, Lincoln Park, Riverview, Taylor,  Trenton, Flat Rock, Wyandotte, Brownstown, Belleville, Dearborn, Dearborn Heights, Westland, Garden City,  Plymouth, Canton and the Downriver, Michigan area.