How Do I Know if I Qualify for Chapter 7 Bankruptcy?

Not everyone who is insolvent or in some financial distress may necessarily be eligible for Chapter 7 bankruptcy. A debtor whose debts are primarily consumer debts (debts incurred for personal, family or household purposes) must have an income below certain levels (varying by state and family size) in order to qualify. A means test is employed to compare monthly income with debt to determine eligibility to file.  Persons whose debts are primarily business debts do not have to satisfy the means test to be eligible to file for chapter 7 bankruptcy.

For those to whom the means test is applicable, the first step is  to check to see if one’s monthly income falls below the state’s median income level. It varies depending on one’s family size.  For a single filerin New Mexico , with no dependents, the median income level is $40,722. For a family of two or three, the level is $53,385.  And for a family of four, the median amount is $61,837. Anyone filing whose income is less than these applicable amounts automatically qualifies to file a Chapter 7 case.

But even for those whose median incomes exceed these amounts, it is possible to qualify depending on the size of one’s expenses. The formula for making this determination is much more complicated. While the relevant data to be used is reflected in Form 22-A1 here, it is advisable to consult a bankruptcy attorney in New Mexico to carefully ensure the data used reflects the information that needs to be included in the form.

What is important to recognize is that the law focuses on one’s income for the prior six-month period before filing. If one’s income is too high, it may still be possible to file a Chapter 13 action instead. Also, if one’s income declines during the next six-month period or a longer period thereafter, it may be possible a filer can qualify at that time.                 

In Albuquerque, Giddens & Gatton Law, PC has bankruptcy attorneys who offer expert handling of Chapter 7, Chapter 11, Chapter 12 and Chapter 13 bankruptcy cases and can specifically provide advice as to disposition of property in Chapter 7, Chapter 11 and Chapter 13 cases.. The New Mexico firm represents many debtors and creditors in Albuquerque, Santa Fe, Taos, Raton, Farmington, Gallup, Grants, Roswell, Los Lunas, Placitas, Belen and the rest of New Mexico. Contact Giddens & Gatton Law, PC at (505) 633-6298 to set up an appointment or visit the firm’s website at giddenslaw.com. Giddens & Gatton Law, PC is located at 10400 Academy Road N.E., Suite 350 in Albuquerque, New Mexico.