Many Arkansas families face financial concerns, fear repossession or foreclosure. Company layoffs, unexpected medical bills or other significant life events can easily land your family in debt. Once you miss a few bill payments, you may find yourself falling deeper and deeper into debt each month.

At some point, you may realize that you need to find a financial solution and consider the possibility of filing for bankruptcy. You may have heard that Chapter 7 bankruptcy can completely eliminate your unsecured debts, but not all families are eligible to do so. How do you know if your family is eligible to file for Chapter 7 bankruptcy?

Understanding the means test in Arkansas

In order to eliminate unsecured debts with Chapter 7 bankruptcy, your family must meet the guidelines of the means test. The means test compares your average monthly income to the average monthly income of an Arkansas family with the same number of people as your own. If your family’s income remains at or below this average, you may be eligible to file for Chapter 7 bankruptcy. Income includes all regularly received funds, including:

  • Salary and bonuses
  • Interest
  • Dividends
  • Child or spousal support
  • Unemployment benefits
  • Workers’ compensation
  • Pension

Average incomes are adjusted on a regular basis to account for factors such as inflation. A qualified attorney can provide you with the current average income for a family of your size and help you evaluate your eligibility.

You still have options if you fail the means test

If you are ineligible to file for Chapter 7 bankruptcy, you still have options to take control of your financial future. A qualified Arkansas bankruptcy lawyer can evaluate your family’s circumstances and provide you with your debt relief options.

Families who cannot file for Chapter 7 bankruptcy regularly file for Chapter 13 bankruptcy instead. While Chapter 13 will not completely eliminate your debts, it can reorganize payments into a manageable three-to-five year repayment plan. In many cases, you will only be required to pay a portion of your overall debts.