If it is time to file for bankruptcy, you may have trouble determining which bankruptcy you are qualified for, whether it be Chapter 7 or Chapter 13. For Chapter 7 Bankruptcy, you must undergo the means test if your debt is primarily consumer debt, meaning more than half of your debt is incurred from personal, family, or household expenses.
If you pass the means test, you will be able to file for Chapter 7 Bankruptcy. If you do not, you can look into other options.
Consumer Debt Vs. Non-Consumer Debt (or Business Debt)
How can you estimate whether your debt is primarily consumer debt or non-consumer debt?
· Consumer Debt: Find out which of your debts are consumer debt by looking at how the debts were incurred. Did you spend the money on yourself, your family, or your household? This can be any expenses that come up or goods that were purchased.
· Examples: Home mortgage, child support payments, personal car loan, electronics, credit card bills (non-business)
· Non-Consumer Debt: Any other debts are considered non-consumer debt or business debt. If the purchase or bill does not go toward your family or household, it is a non-consumer debt.
· Examples: Necessary medical bills, business credit card, taxes, legal fees for business dealings, accident liabilities
Add up your expenses to find out where to start when it’s time to file for bankruptcy. You do not have to do it all on your own. You can hire a bankruptcy lawyer to guide you through the process. If you do have to pass a means test, the court will ask for a more rigorous determination of your debts to determine if you qualify for a Chapter 7 filing. Be prepared with documentation of all of your debts to make things go as smoothly as possible.
To learn more about consumer debt and if you qualify for a Chapter 7 bankruptcy filing, contact Miles & Hatcher, LLP. This time can be harrowing and make you feel like you are in over your head. Seek the advice of our professionals by calling (909) 481-4080.