There are a lot of reasons to consider filing for bankruptcy. Before you do so, you need to determine which chapter you should file. This process begins with the bankruptcy means test, which will tell you if you are eligible for forgiveness by filing with Chapter 7.
The means test is made up of two main steps that will help you understand if you can file for Chapter 7 bankruptcy:
Check your income
To file Chapter 7, your household income must be below the median income of your state. The U.S. Department of Justice says that the average income in Minnesota is:
- $51,260 for a single person
- $68,596 for a family of two
- $80,900 for a family of three
- $98,564 for a family of four
- Additional $8,400 for each family member over four
If your household is below the average income for Minnesota, you pass the test and can file for Chapter 7 bankruptcy.
If your income is not below the state average, you should then document your expenses over the past six months. As thoroughly as possible, write down your rent, mortgage, clothing purchases, groceries, medical bills, gas and car expenses and anything else you spent money on.
If you are using this step of the means test, you should talk with a bankruptcy lawyer. Federal and local laws will allow you to calculate for different things and making a mistake in this step could get your case thrown out. You will then calculate your disposable income and with your lawyer determine if it is low enough to make you eligible for Chapter 7.
If you find that you are not eligible for Chapter 7 bankruptcy through the means test, you may still be able to file with Chapter 13. Talk with a bankruptcy attorney to understand which choice is best for you.