There are two kinds of bankruptcy that people consider when they need debt relief. Chapter 13 bankruptcy involves restructuring your debt, which allows for more reasonable monthly payments. After a set number of payments, the remaining balance on certain accounts ends up discharged. In Chapter 7 bankruptcy, individuals can discharge many non-secured debts without a repayment schedule.

Depending on your circumstances, Chapter 7 bankruptcy may be a good option for taking control of your financial situation. However, in order to qualify for the protections of Chapter 7 bankruptcy, you will need to pass a means test.

What is the means test?

In order to reduce potential abuses of the bankruptcy system, Chapter 7 bankruptcy relief is only available for those who make less than the average income for their household size in their state over the last size months. Comparing your adjusted income to the state average is the simplest way to see if you may qualify for Chapter 7 bankruptcy.

In order to qualify for Chapter 7 bankruptcy, your income must be below the Florida average income for your household size. You must also submit an inventory of your assets, some of which may be subject to liquidation. The courts may order the sale of certain assets to repay creditors. For those with lower income and few substantial assets, Chapter 7 bankruptcy can provide relief from creditors and overwhelming debt.

What income caps apply for Chapter 7 bankruptcy?

For those who live on their own, in a household of one, the median income in Florida is $46,677. For those with two family members, that amount increases to $57,968. The median, or average, income for households with three people is $62,912, which goes up to $74,512 for a family of four.

The amount of income permissible for those filing Chapter 7 bankruptcy changes as the average income in the state changes. These current figures are valid for any bankruptcy cases filed on or after April 1, 2018. It’s important to realize that you can make some deductions from your gross income before comparing it to the state median income. If your income is too high but still close to the median income for your household size, it may be worth seeking additional guidance and help.

Chapter 7 bankruptcy can offer a fresh financial start

Medical debts, credit card debts and other forms of unsecured debts are eligible for discharge under Chapter 7 bankruptcy. Once the courts review you financial documentation and hold a creditor’s meeting, you will receive a discharge of those debts. That discharge can help you take control of your financial situation and get you back on track to a better future.