Bankruptcy Reform: Will The Means Test Prevent Me From A Chapter 7 Bankruptcy?

Bankruptcy was intended as a way for those who were being consumed by overwhelming financial stress and debt to obtain a clean slate. Historically, a Chapter 7 bankruptcy was a quick and easy avenue to have all of one's unsecured financial obligations wiped out. Banks and credit card companies have a strong political lobby and were able to obtain bankruptcy reforms that added a means test to the Chapter 7 bankruptcy process as part of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. What many consumers do not realize is that the vast majority of people can still obtain bankruptcy relief. While the means test does prevent some from receiving a Chapter 7 bankruptcy discharge, even those excluded may still file a Chapter 13 bankruptcy and make installment payments over time. A qualified bankruptcy attorney can advise you of your rights and the best strategy for getting your creditors off your back and your life back on track. At Shakoori Law Group, we help Orange County debtors and those throughout Southern California who need bankruptcy protection, foreclosure defense or other protection from creditors.

Many people assume that the Chapter 7 bankruptcy means test requires that a person must be destitute to qualify for a Chapter 7 bankruptcy discharge. Contrary to popular perception, most middle class Americans are still eligible for Chapter 7 liquidation of their unsecured debts. The first level of analysis in determining eligibility under the Chapter 7 bankruptcy means test is whether one's income exceeds the medium California income level. A Chapter 7 bankruptcy may be filed in California if their income and family size meet the thresholds below (as of April 19, 2010):

  • One Person: $47,969
  • Two Persons: $64,647
  • Three Persons: $70,638
  • Four Persons: $79,194

If your income exceeds these thresholds, eligibility for a Chapter 7 bankruptcy is determined by deducting certain specified monthly expenses from you monthly income, which is calculated by averaging your income over the six month period preceding your Chapter 7 bankruptcy filing. The resulting income above your monthly expenses is considered your "disposable income." The higher your disposable income, the more likely the determination you must file a Chapter 13 bankruptcy because you have sufficient income to repay some of your unsecured debt.

The experienced Orange County bankruptcy attorneys at Shakoori Law Group can help you qualify for a Chapter 7 bankruptcy by helping you think of expenses you may not have considered and maximizing the listed expenses. Counties and metropolitan regions have different allowed amounts for categories of expenses: basic necessities, housing, and transportation. Our knowledgeable team can maximize the expenses you claim so that you have the best chance of qualifying for Chapter 7 relief. Even if you do not qualify, we can still help you by filing a Chapter 13 or using other appropriate strategies. The Shakoori Law Office is conveniently located in Santa Ana, California and assists clients throughout Southern California including but not limited to the following: Santa Ana, Tustin, Fullerton, Orange, Anaheim, Irvine, Newport Beach, Costa Mesa, Fountain Valley, Huntington Beach, Westminster, Garden Grove, Orange, Buena Park, Placentia, Yorba Linda, Irvine and throughout Los Angeles, Riverside and San Bernardino Counties. Call today for your no obligation free initial consultation 800-578-0922.

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