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Reaching Your Financial Breaking Point? Discussing Bankruptcy Eligibility Criteria

Posted on in Bankruptcy

You have reached your breaking point. You are in over your head and have decided that filing for bankruptcy may be your only recourse. It has come down to the wire. You can no longer successfully handle your growing debt and need relief.

Your best option is to contact an experienced bankruptcy attorney in your area but until your scheduled consultation, the following information may provide you a headstart.

If you reside in the state of Illinois, under the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA), you will need to pass a Means Test to determine income eligibility if you are seeking any type of bankruptcy relief. It is in your best interest to discuss all options with a qualified Illinois bankruptcy attorney.

What is the Functionality of a Means Test?

To protect consumers from abusing bankruptcy laws, the Means Test was designed to separate debtors who are truly in financial turmoil from those who may be seeking only to renege on their debts.

What are the Eligibility Requirements?

If you are working toward petitioning for Chapter 7 Bankruptcy, the Means Test is the beginning of the process. With the assistance of your bankruptcy attorney you will need to address the Means Test to compare your median income for the past six months against Illinois state median income guidelines. If you find that your median income is less than the state issued income limits for your family size, then you would automatically qualify for Chapter 7. If it takes another turn, clearly demonstrating that your income is higher than the allowable limit, you and your attorney will need to determine your household monthly disposable income. This is calculated as:

IRS Monthly Income Determination – Allowable Monthly Expenses = Disposable Income

If it is determined that your disposable income is less than $100 or it would satisfy less than 25 percent of your debt over the next five years, you would be qualified to file for Chapter 7 bankruptcy. If your disposable income for the next five years exceeds $10,000 you would not qualify.

Who Defines the Median Income Guidelines?

The set income guidelines are determined from information compiled by the U.S. Census Bureau and are available through the U.S. Trustee program for each state. This information is presented in table format and includes IRS filing status and family size guidelines.

What Else Will My Attorney Discuss With Me?

Your attorney will inform you that each county sets varying amounts of what you may detect as regular monthly expenses. It is also important to use only the allowable amounts for your Illinois area. This practice ensures an accurate calculation of monthly disposable income with regard to the Means Test allotted guidelines.

If you do not meet the requirements of the Chapter 7 bankruptcy Means Test you should further discuss perhaps petitioning for Chapter 13 bankruptcy.

For those Illinois residents residing in the Arlington Heights, Libertyville, Crystal Lake, Waukegan or Chicago areas, the experienced legal team of Newland & Newland, LLP have been helping families through difficult financial situations since 1993. We will concisely review your financial portrait to determine the best course of debt relief for you and your family. Visit our website today for the telephone number for our closet office location in your area.

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