Not everyone can file for Chapter 7 in Texas even if they are drowning in debt. If you are eligible for Chapter 7, then it means you are not capable of restructuring it as you would under Chapter 13 even if you wanted to so that you can still meet your obligations. As determined by the means test, your income will simply not cover all your monthly payments without sacrificing your basic needs. In some cases, however, it could simply mean that you are unnecessarily spending more than what you earn, and this can make you ineligible. For Chapter 7 eligibility, you have to meet certain conditions.

The Means Test

According to the website of Gagnon, Peacock & Vereeke PC, the means test for Chapter 7 only applies to people who have income that is over the median income for the applicable household size but are still unable to meet their debts. You can do this by applying a little organization and math. You need to get your current and future monthly income and expenses from your financial records.

Your income will include but not limited to your wages, business income, dividends, money from pension and retirement plans, and unemployment income. Your expenses will include only those that will recur over the next 60 months, legally required (such as child support) and essential for health and welfare. It should not include expenses for the purchase of luxury items such as designer clothing and recreational vehicles.

Once you have gotten all the information, subtract expenses from your income. If you come up with less than $7,475, then you pass the means test and are eligible for Chapter 7.

Median Income

On the other hand, you will not need to pass the means test under specific circumstances. One is when your annual income is less than the median income in Texas for your size household. For example, the median income for a two-member household is $56,296.00. If you live with one other person and your combined household income is $50,000, you will not have to take the means test.

Others

You are also exempt from the means test if you are a disabled veteran, if you are on active duty as a military reservist or National Guard, or what you owe are primarily non-consumer debts. These are not cut-and-dried conditions however, so consult your attorney before doing anything.

If you believe you are eligible for Chapter 7, you can find out for sure. Your lawyer can better explain the details for these exceptions as they apply in your particular situation. Find a reputable bankruptcy lawyer in your area and get started.

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