When a person is experiencing significant financial problems, they will often do everything in their power to try to stay afloat, whether that means taking on another job, cutting unnecessary costs or making only minimum monthly payments until they can catch up.
While these efforts are certainly laudable, what is perhaps even more laudable is when a person has to courage to recognize that their debt has simply become overwhelming despite their best efforts and that they would perhaps benefit from filing for Chapter 7 bankruptcy.
While it’s true that Chapter 7 bankruptcy can stop foreclosure, put an end to harassing communications from debt collectors and offer a fresh financial start, it’s nevertheless important for those considering this option to understand that they will have to satisfy certain criteria.
For starters, the person will have to pass what is known as the “means test.”
While this is a rather intricate topic, the basic explanation is that a person must meet one of two conditions in order to pass the means test:
- Their current monthly income must be less than the applicable state median; or
- They must not have more than a few hundred dollars of disposable monthly income, meaning the amount left over after making “allowed” monthly payments for things like food, clothing and health care (Please note: this is a very complicated calculation necessitating the use of a complex formula)
In the event the person does not meet either of these conditions, it’s important to understand that they are not necessarily out of options. In fact, with their consent, their case can typically be converted into a Chapter 13 bankruptcy filing.
What all of this really serves to underscore, however, is that those ready and willing to consider Chapter 7 bankruptcy would nevertheless be well served to consider speaking with an experienced legal professional who can help determine whether they are indeed able to proceed and, if not, what other debt relief options may be available.