If you qualify for Chapter 7 bankruptcy in Minnesota, the court will discharge most of your unsecured debts by the end of the process. However, the bankruptcy court needs to know that you genuinely can’t pay off your loans and aren’t just looking for a quick way to get out of debt. That’s why the law requires a means test before you begin.
What is a means test?
According to bankruptcy law, you’ll have to pass the means test to qualify for Chapter 7 bankruptcy. To start, you’ll need to give the court a clear picture of your current income. Gather documents from the past six months to show how much you’ve made. If you make less than the median income for your state, you’ll immediately pass the means test.
If you make more than the median income, you’re not automatically disqualified. Your bankruptcy law attorney could help you navigate the next part of the test, which involves documenting your expenses for the past six months. You’ll subtract your expenses from your income to reveal how much you have left over. If the court rules that you don’t have enough disposable income to pay off your debts, you’ll qualify for Chapter 7 bankruptcy.
Otherwise, you could still file for Chapter 13 to pay off your debts. Unlike Chapter 7 bankruptcy, Chapter 13 involves figuring out a payment plan so you can repay your creditors. If you don’t want to file for Chapter 13, you could wait another six months and take the means test again to see if you qualify. You might qualify if you’ve experienced a significant reduction in income.
What happens if you qualify?
If you qualify for Chapter 7, your attorney could help you through the next steps. Your attorney could also give you advice on rebuilding your credit after your bankruptcy.
Filing for bankruptcy affects your credit score, but it doesn’t mean that your credit is ruined forever. Over time, you can start rebuilding your credit by taking out secure loans and proving that you can be financially responsible.
