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Filing Bankruptcy In Texas Yourself
The bankruptcy means test was created to aid in identifying debtors who have the ability to pay their unsecured debts. After being identified these debtors are encouraged to pay these debts through a repayment plan under a Chapter 13 bankruptcy. Those without the “means” to pay their debts under a Chapter 13 bankruptcy may qualify for a Chapter 7 bankruptcy. Talk to an experienced bankruptcy lawyer if you want to know whether you qualify for a Chapter 13 or a Chapter 7 bankruptcy.
Median Income
The means test focuses both on your income and expenses. So if your income is more than the Texas median income then you cannot file a Chapter 7 bankruptcy. If it’s less than the Texas median income, then you are eligible to file a Chapter 7 provided you meet other legal requirements. People who qualify for a Chapter 7 bankruptcy are people whose expenses and debts are more than they can afford to pay back. The following are the Texas median incomes according to household size for cases filed between November 1, 2019 and March 31, 2020:
- Household of 1: $49,996
- Household of 2: $65,708
- Household of 3: $72,632
- Household of 4: $84,724
There is an additional 9,000 for each individual in excess of 4.
What Happens If You Don’t Pass The Means Test
You are considered to have passed the means test if your family’s income is less than the Texas (or the state you reside in) median income for your household size. People with incomes that exceed the state’s median income are often people who have the means to pay a portion of their unsecured debts. That means that they have disposable income that is sufficient to pay 25% or more of their unsecured debt. Your disposable income is the amount that remains after you deduct certain expenses from your current monthly income based on IRS national standards.
If you should multiply your disposable income by 60 and the resulting amount is less than $7,475, then you have passed the means test and qualify for a Chapter 7 bankruptcy. But if the resulting amount is more than $12,475 you cannot file for a Chapter 7. However, there are exceptions to this rule in situations where you recently lost your job or your income was reduced. An experienced bankruptcy lawyer can help you determine if such exceptions apply to your situation.
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Why A Chapter 7 Bankruptcy?
People who want most or all of their debts eliminated so that they can get a “fresh start” often file for a Chapter 7 bankruptcy. Under a Chapter 7 bankruptcy a trustee sells all your non exempt assets and the money is divided among your creditors. The remaining debt is discharged and creditors are not allowed to collect any debt that was discharged. If you only own property that is exempt, you get to keep all that property and your debts are discharged. However, just because you are eligible to file for a Chapter 7 bankruptcy does not mean that you should file. There could be other less drastic alternatives that may benefit you more than bankruptcy.