If you are one of the many people across New Hampshire currently considering filing for bankruptcy, you may justifiably have questions about how to do so, and whether it might be a smart financial move for you. You may also have questions about what type of bankruptcy might be right for you, and this will depend on many different factors. However, if you decide you want to pursue debt relief through a Chapter 7 bankruptcy, you must first pass a bankruptcy means test.
Essentially, the bankruptcy means test looks and your income and expenses to decide whether you can qualify for a Chapter 7 bankruptcy. The most notable difference between the two types is that a Chapter 7 bankruptcy typically relieves you entirely of your debts, while a Chapter 13 bankruptcy requires that you pay back at least part of them.
The first step of the means test
If your household income falls below New Hampshire’s median household income, you can skip step two of the bankruptcy means test, because you are automatically eligible for a Chapter 7 bankruptcy. If your income is too high, but you still want to try and qualify for a Chapter 7 bankruptcy, you will have to proceed to step two of the test.
The second step of the means test
In step two, you will have to furnish comprehensive information and documentation relating to your expenses from the prior six months. Certain expenses, such as food and health care, are “allowable,” but any income you have left over becomes disposable income. Ultimately, how much disposable income you have at hand will determine whether you are eligible for Chapter 7 bankruptcy.
Remember, passing the means test does not always mean a Chapter 7 bankruptcy is in your best interest. This depends on many different factors, and every bankruptcy situation is different. In some cases, a Chapter 13 bankruptcy or another alternative may be the best option for you.