If you want to file for Chapter 7 bankruptcy, you have to take a means test. Among other things, you have to report your monthly income. The court needs to get an idea of your assets, income, debts and financial obligations and expenses.
So what happens if you fail the means test? Say that your monthly income is simply too high, so you do not qualify for Chapter 7 bankruptcy. What other options do you have?
Using Chapter 13 bankruptcy
You may still qualify for Chapter 13. Using this option means that you set up a structured repayment plan. Over the next three to five years, as long as you make your monthly payments, you slowly pay off your debt.
This can work well if you have a steady income. Your debt may certainly be more than you can afford to pay, especially if much of it is due at one time. However, spreading it out over five years may mean that you can simply budget for your monthly payments and address the debt this way.
On top of that, Chapter 13 does not require you to liquidate any of your assets, like Chapter 7 does. Therefore, this can be an excellent option if you do not want to risk the things you already own and you just need a restructured plan so that you can pay off your debts.
Whether you use Chapter 7 or Chapter 13, be sure you know about all of the legal options that you have and the steps you will need to take to set everything up correctly. It can help to work with an experienced law firm as you seek a positive financial future.
