Once you determine that you need to file for bankruptcy, you then need to make certain decisions about how you will do so. The form or chapter of bankruptcy that you file will have a major effect on how bankruptcy works in your case.
In a Chapter 13 bankruptcy, you have to complete a repayment plan through the courts before your discharge but can protect more assets and income. In Chapter 7 bankruptcy, you may have to liquidate some of your property before your discharge, although you can exempt much of your property from this process.
Many people look at Chapter 7 bankruptcy as a good solution because it is faster and doesn’t require that they make payments for multiple years to get their discharge. If you want to file for Chapter 7 bankruptcy, you have to qualify by passing a means test. How can you determine if Chapter 7 bankruptcy is an option for you?
Chapter 7 eligibility depends on your adjusted income
To determine whether or not you can file for Chapter 7 bankruptcy, you need to look at your annual income and then make adjustments for certain necessary and exempt expenses. You then compare your adjusted income to the state median income.
In New Jersey, the median income is higher, which means that you can qualify with more income than you could and many other states. The size of your family affects how much income you can have and still qualify for Chapter 7 proceedings.
For a family of one, the maximum adjusted income is $71,941. The median income increases to $88,511 for households with two members, while three-person families can have an income of up to $112,416. Households with four members can have an adjusted income of as much as $134,345, and bigger families can add another $9,000 per additional family member to the maximum income amount.
Making bankruptcy work for you
Those with income levels close to the cutoff may want to talk with the bankruptcy attorney, as careful accounting during the adjustment process can sometimes be the difference between qualifying or not.
If you believe you do qualify for Chapter 7 bankruptcy proceedings, The next step will then be to create a list of all of your debts and assets to determine what you can discharge and what property you can exempt. The better your understanding of the bankruptcy process, the more beneficial it can be to you in the long run.