Do I Qualify for Chapter 7 Bankruptcy?

A lot has been made of the recent changes to the US bankruptcy laws (the Bankruptcy Abuse and Consumer Protection Act of 2005, often referred to simply as "BAPCA").  One of the particularly troublesome areas for many debtors is the "Current Monthly Income" threshold for filers as it applies to Chapter 7.  

While the figure varies from state to state (my own location, Orlando, Florida, has a Current Monthly Income threshold of $41,220 for a household of 1), much of the time, people who are having financial difficulties are making low to no income anyway, so this may not even be an issue.

Your Options If Income is Above the Median

But what if your income rises above the "Current Monthy Income" threshold?  Are you doomed to a life on the run from your creditors?  Many debtors think that such a scenario represents the endgame for them, that there is no way they can file a Chapter 7 bankruptcy with their income so high.  This is not necessarily so.

Indeed, if your income is above the "Current Monthly Income" threshold, you enter into what's commonly referred to as the "means test," a balancing stage where your expenses are weighed against your income.  

If your expenses exceed your net income, you can file Chapter 7; if your expenses are less than your net income, you probably cannot file a Chapter 7 (the "presumption of abuse" arises).  

While this may seem simple enough to determine, bear in mind that the "value" of a given expense depends on a number of complicated formulas.  For this reason, it is very important to speak with an experienced bankruptcy attorney before taking any course of action.