Determining whether you meet the income limit for Chapter 7

Chapter 7 bankruptcy is also referred to as liquidation bankruptcy. As the name implies, it can require that you sell or liquidate some of your property. It’s faster and more aggressive than Chapter 13 bankruptcy.

Thankfully, the equity in your home, your vehicles and certain other personal possessions are at least partially exempt from liquidation requirements when you file Chapter 7. However, in order to qualify for Chapter 7 bankruptcy, you have to first pass a means test. Essentially, you need to compare your adjusted household income to the Alabama state median income to determine if you qualify.

What is the income limit for your household size?

If you live by yourself, do not have any children and are not married, then the maximum adjusted income you can have while still qualifying for Chapter 7 bankruptcy is $49,798. If you have a spouse or one dependent in your family, that cap increases to $60,556.

Families of three can qualify with a household income of $67,098, while a four-person family can have an income of up to $81,842. Larger families can add an additional $9,000 for every additional family member to determine if their income qualifies or not.

What if you are very close to the limit?

Some people have an income that is clearly above or far below the maximum for their household size. Others are close to the cut-off amount.

If you aren’t sure if you qualify, going over your income and how you adjusted it can help you clarify if Chapter 7 bankruptcy is an option for you. An experienced bankruptcy attorney can provide valuable guidance as you make this important decision.

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