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If you are an individual (including married couples) and are facing a personal bankruptcy, you will generally have to choose between two types of bankruptcy filings – Chapter 7 or Chapter 13. The one you choose will largely depend on your income and assets. Chapter 7 is the bankruptcy type that most people think of when discussing a “clean slate.” In Chapter 7, a debtor’s entire obligation is written-off and discharged, leaving that person with no ongoing debts (with a few exceptions). If this sounds like what you are looking for, you’ll want to check state rules to make sure you qualify. If you are having difficulty paying your bills and need help deciding which type of bankruptcy might be right for you, contact David Aylor Law Offices today.
South Carolina Means Test for Chapter 7
To qualify for a Chapter 7 discharge of your debts, a debtor must qualify based on his or her state’s “means test.” Here’s how it works.
Step 1: Is your income below the threshold based on your household size?
Based on the most recent guidelines, here are the current limits on income to qualify for a Chapter 7 bankruptcy. Keep in mind that these are expected to go up again soon, so if you are cutting it close in terms of income, you may want to act sooner than later.
Number of people in household Income Limit to Qualify for Chapter 7
1 $39,301.00
2 $48,891.00
3 $54,010.00
4 $62,490.00
5 $70,590.00
6 $78,690.00
7 $86,790.00
8 $94,890.00
9 $102,990.00
10 $111,090.00
Step 2: Income above the limit, proceed to the means test.
As of the most recent guidelines, if your income falls below the amounts listed above, you can proceed with a Chapter 7 bankruptcy. However, even if your income is slightly above these amounts, it does not mean you are ineligible. Instead, you will just have to undergo more scrutiny and pass a means test to determine if you qualify. If not, you would need to file a Chapter 13 bankruptcy.
A means test is simply a calculation of your assets, liabilities, and income, designed to determine your overall capacity to repay debts. You will likely want to work closely with an experienced attorney to gather the necessary documentation, so as to improve your chances of success.
Step 3: Determine Whether Chapter 7 is Right For You
Keep in mind that there is more to a bankruptcy than just getting a clean slate. You may have items that you don’t want to give up. For instance, if you own a home or a vehicle, you may wish to keep these items. There are a couple ways to do that. On one hand, you can “reaffirm” a debt, thus excluding it from bankruptcy. This means that you agree to continue paying the debt in order to keep the property. However, if you fall behind in the future, you would be unable to discharge it. Another option is Chapter 13. In a Chapter 13 bankruptcy, you actually don’t get rid of most debts. Instead, you get a reduction and spread out the debt over a longer period of time and stop the heavy interest that often comes with some debts. For instance, a $10,000 credit card that would normally take seven years to pay off at current interest rates might be spread over as little as three to five years with no interest, thereby allowing you to pay it off.
Get Help Deciding
If you are curious about your options for discharging debts or have concerns about keeping your car, home, or other assets, call David Aylor Law Offices today to schedule a consultation to discuss your options.