Whether one qualifies for personal bankruptcy depends on a host of factors that may change month by month. I will cover some of the basics that should give you an idea if you qualify. It is important to consult with an experienced Connecticut bankruptcy attorney, as local rules and laws differ from state to state.
There is a difference between Chapter 7 bankruptcy and Chapter 13. In a chapter 7 case the debtor is discharged completely of his / her legal obligation to repay all dischargeable debts. Most individuals will be able to use the Federal or State exemptions to protect their exempt property. Almost all of my clients have kept all of their property in Chapter 7.
To qualify for Chapter 7, we look at the debtor’s net income and necessary monthly expenses (This does not include unsecured debts such as credit cards and medical bills). If there is no or negligible disposable income after these expenses, we determine if the debtor is at or below the state medium income for their household size. If the debtors’ household income is greater than the state medium income, we perform the “means test”. If we can satisfy the means test the debtor qualifies. If the income is below the state medium income, the debtor would qualify without the need for the full “means test”
In Chapter 13 the debtor will repay as much of her / his unsecured debt as possible over a period of not more than 5 years. To qualify for Chapter 13, the debtor needs to establish that their income is sufficient to pay all of their necessary expenses plus contribute to the unsecured debt, pay the Bankruptcy Trustee’s fee, any administrative costs and have a reasonable cushion for themselves. Other factors sometimes apply as well.
There are many other factors that have to be considered. Below are a few:
- An individual who received a chapter 7 discharge less than 8 years ago, does not qualify to file chapter 7 again until the 8 years expires.
- Certain debts are not dischargeable in bankruptcy, such as domestic support obligations, most student loans, debts for death or injury caused by the debtor’s operation of a motor vehicle while intoxicated from alcohol or drugs and others listed in the article “Bankruptcy Discharge – What Debts Are Relieved And What Are Not”. If these non-dischargeable debts make up a significant portion of a debtor’s entire debt, bankruptcy may not offer the financial relief sought. In this case we will review other non-bankruptcy options.
- If the equity in personal and / or real property exceeds the exemption allowed, the debtor could be at risk of losing such property. The debtor will have to determine if the benefit of being relieved of her / his debt outweighs the loss of unprotected property. Non Bankruptcy options will also be considered.
It is rare, but sometimes bankruptcy may not be advisable even if the debtor(s) otherwise qualify. No two debtors’ circumstances are exactly the same. The Law Offices Of Bellenot & Boufford, LLC have more than 26 years of experience and are qualified to help you make the correct decision for you and your family’s financial future and quality of life. Contact us if you are considering bankruptcy so you can make the right decision.
Serving Danbury, Connecticut and all of Fairfield and New Haven Counties.