You want to file for Chapter 7 bankruptcy. You know that you cannot afford the debt that you currently have on the income that you’re making. You need to clear up some of that debt and give yourself a fresh financial start. If you don’t, you worry that the debt is only going to get worse over time.
Then you take the means test, and you’re told that you earn too much money to qualify for Chapter 7. You have failed that means test. People often assume this means that they have no other options and that the court is assuming they should be able to afford their debt on their own income. But is this true?
You may qualify for Chapter 13
This is not true, at least not in all cases. Being denied for Chapter 7 because you have failed the means test does not mean that you can’t use bankruptcy or that you have to pay off all of that debt out of your income. It may simply mean that you have to use Chapter 13 bankruptcy instead.
Chapter 13 bankruptcy is much different. Instead of liquidating assets to pay off your debt, the debt that you have is consolidated. You are then given a repayment plan, and you make one monthly payment for a period of 3 to 5 years. As long as you stay current on those payments, you can slowly eliminate this debt. The goal is to make your current debt load affordable based on the income you’re making, so you can still use bankruptcy even though you have significant earnings.
Many people are surprised by all the options that they have with bankruptcy. This is why it’s so important to carefully consider the legal steps you can take.