When individuals are overrun by consuming debt, they may be unsure of what to do next. The bills are piling up, interest is accumulating and creditors are calling. Where can you turn for relief? Will you ever be able to have solid financial footing again? You may find the answers to these questions and more by filing for bankruptcy.
Many Texas readers who believe that moving forward with bankruptcy is the right choice for them prefer to file for Chapter 7. This is a popular option, but it is not always the most beneficial choice. In fact, there are strict eligibility requirements for Chapter 7. If you wish to apply, you will first have to take a means test that will evaluate your income and your financial obligations.
What should you know about the means test?
There are a few types of applicants who may be able to bypass the means test when applying for Chapter 7 bankruptcy. These include disabled veterans and those with debt mostly from operating a business. Other than these two categories, you will likely have to complete this test in order to move forward with the process.
There are two main steps to this process. The first step looks at all of your sources of income, which may include more things that you realize. The means test uses the following to calculate income:
- Gross income from operating a business
- Royalties or interest earned from investments
- Tips or overtime earnings
- Bonuses from your job
- Unemployment compensation
- Income from your pension and retirement accounts
- Workers' compensation
The means test will take these and other things into account. If the result is that you earn more than the median income of your state, the second step will be necessary. The second step deducts all of your expenses and financial obligations. If your income is over a certain amount after this, you will not be eligible for Chapter 7 bankruptcy.
All of your bankruptcy options
If you are not eligible for Chapter 7 bankruptcy, you may choose to move forward with Chapter 13 bankruptcy. Both of these options will allow you to deal with your debt in an organized way.
Both Chapter 7 and Chapter 13 offer you a way to effectively confront your debt and reclaim your peace of mind regarding your finances. It may be beneficial for you to seek a complete evaluation of your case and explanation of eligibility requirements.