DO I QUALIFY?

DO I QUALIFY FOR BANKRUPTCY?

People will often ask if they qualify for bankruptcy?  Specifically, what they are really asking is if they qualify for a chapter 7 bankruptcy? Well, if you live in the Leesburg, Virginia area and are looking for a bankruptcy attorney to help you figure that out, I am here to help.

Your first concern might be what about my assets? Do I have to worry about losing my car or my home? For the vast majority of my clients this is a non-issue. Statistically, over 90% of cases are deemed “non-asset” cases.  Meaning, you do not have to worry about losing any of your assets as a result of your chapter 7 bankruptcy filing.  In the eyes of the chapter 7 trustee, your assets either have no value/equity, or for the assets that do have value/equity, they are protected by bankruptcy exemptions.

So how do you know if you qualify for a chapter 7 bankruptcy? It all comes down to income as compared to your family size.  Take a look at the chart below which shows figures for the state of Virginia.

Household Size:                                                                                         Income:

1                                                                                                                     $52,000.00

2                                                                                                                     $66,000.00

3                                                                                                                     $74,000.00

4                                                                                                                     $90,000.00

5                                                                                                                     $98,000.00 (all figures are rounded up/down)

All you have to do is figure out your income and your family size.  Congress determines the income figures and makes slight adjustments to the figures each year.  If your income is below the figures as seen on the chart based on your family size, then you automatically qualify for a chapter 7 bankruptcy filing.  A family of three living in Leesburg, Virginia that has a combined income of $72,000 for example would automatically qualify for a chapter 7 bankruptcy.  What about that same family of three now living in Las Vegas, Nevada for instance? Well, the figure there for a family of three out there is $63,000. So be glad that you live in the Commonwealth since in addition to income and family size, geography matters as well.

As far as income is concerned, it is based on gross income figures over the 6 months preceding the bankruptcy filing. But, there are exceptions knows as “special circumstances.” Maybe that overtime or bonus should not count as income after all.  What about my spouse, does his/her income count? Well, if you are not separated the answer is yes, but not all of the income will count. As for family size, well, that can get a little tricky as well. The United States Court of Appeal for the Fourth Circuit had to intervene and made a ruling in July of 2012 to finally put to rest the issue of how family size ought to be calculated in the Virginia and the surrounding states.

Point is: do not be so quick to assume that you do not qualify for chapter 7 relief. Do not diagnose yourself in other words!

And if you are an individual making more than the allowed amount of income imposed by Congress as determined by your home state and family size, then you will be subjected to the Means Test. You can find hundreds of articles online on the Means Test, but suffice to say, if you do not make a whole lot more than the “allowed amount” then you will likely be able to qualify despite the Means Test.

And what if you make considerable more income than the “allowed amount”? Then, you should still not be so quick to conclude that you do not qualify.  A good bankruptcy lawyer will be quick to point out to you that there is no such thing as “passing” or “failing” the means test. Rather, if your income is too high there is a presumption of abuse, but that presumption can be overcome. You have to look beyond the Means Test. If at the end of the day when accounting for all your day to day living expenses all you have left at the end of the month is $200.00, then chances are you will qualify for a chapter 7 bankruptcy, regardless of what the Means Test says!

Another thing that an experienced bankruptcy attorney is aware of is that Congress created some exceptions to the Means Test. Some folks, regardless of what their income is, will automatically qualify for a chapter 7 bankruptcy. Which people am I talking about?  Individuals whose majority of debt –as in more than 51% of total debt- is of the type called “non-consumer debt.” The classic example is an individual whose business has failed.  If the majority of the debt is tied to the business, then the fact that that person is now employed and making six figures will not make a difference. The Means Test would simply not apply to this person and he would automatically qualify for a chapter 7 bankruptcy.

So again, please do not be quick to jump to conclusions or to assume that you are doomed. Instead, call an experienced bankruptcy lawyer like myself and allow me to analyze your situation. You might be pleasantly surprised at what I have to say!