Deciding to investigate the options bankruptcy has to offer is a big step. A person who reaches this decision is probably weary of struggling with bills, harassing phone calls from creditors and letters threatening ominous consequences for unpaid debt. That person is not alone because many in Columbia and other parts of South Carolina are in similar circumstances. Many choose to investigate Chapter 7 bankruptcy because it promises a clean slate by eliminating much — and sometimes all — of a person’s unsecured debt. However, there are steps one must take to reach that goal.
Before filing for Chapter 7, a person must pass a means test to see if he or she is eligible. While the word “test” may worry some, over 80 percent of those who take the test are able to pass. The means test measures someone’s debt and ability to repay. Applicants report their adjusted household income for the previous six months and compare it to the median income for their state. Anyone who falls below the median income is likely eligible to file for Chapter 7.
The next step is tallying one’s allowable expenses for the same time period, such as groceries, rent or medical expenses. The difference between one’s income and one’s allowable expenses is called disposable income and may be used to help pay down the debt. Determining disposable income is the area in which those seeking relief often make mistakes by not being thorough. In South Carolina and elsewhere, it is helpful to have professional assistance to ensure accuracy.
Those who are burdened by credit card or medical debt are most likely to qualify for Chapter 7 debt relief. After passing the means test, most or all of that unsecured debt may be forgiven. Because filing for bankruptcy can be complicated and crucial to one’s financial health, many in Columbia work with an experienced bankruptcy attorney who can guide them through the process.
Source: The Christian Sciene Monitor, “Why the bankruptcy means test matters”, Sean Pyles, Accessed on March 27, 2017