There are very many factors that must be analyzed before an attorney can determine what type of bankruptcy a debtor is eligible for, but income, assets, family size, expenses and amount of debt are some of the most important.
Generally speaking, eligibility for a chapter 7 bankruptcy is measured by how much monthly income a debtor has made in the past 6 months. For example, an individual debtor with no dependants making under approximately $48,000/yr will likely be eligible for a chapter bankruptcy. If the individual owns a home, then the home’s equity must be addressed. Under certain bankruptcy laws, an individual can have up to $50,000 equity in his or her home and still keep their home in a chapter 7 bankruptcy. If the debtor does not own a home or does not have equity in his home, then cases are much simpler. In those scenarios, all that needs to be protected is the debtor’s personal belonging like cars, furnishings, jewelry etc. In California, debtors who do not have much equity in their home are allowed to protect more than $20,000 of equity in personal belongings like cars, furnishings, jewelry, boats, trailers, business machinery and much more. Individual debtors with no dependants who make more than $48,000 are also eligible to file for bankruptcy, albeit the process is more complex. In those scenarios it is necessary to further examine the debtor’s expenses and justify his or her monthly expenditures.
Conversely, in a chapter 13, income does not determine a debtor’s eligibility usually, but instead monthly income can be the deciding factor in determining the amount an individual will pay in his monthly payment plan. Generally speaking, a debtor’s repayment plan and the proportion of debt to be repaid are calculated by subtracting the debtor’s monthly justifiable living expenses from his monthly income. This number results in a disposable monthly income (DMI) figure that tells creditors how much a debtor can afford to repay on a monthly basis. It is this number that usually determines what a debtor’s monthly payment to creditors will be.
These are just some of the many factors and calculations that must be assessed by an experienced bankruptcy attorney before a debtor can make the important decision of filing for bankruptcy. Our knowledgeable attorneys can help guide debtors through the intricacies of bankruptcy law and assist them in obtaining a successful discharge.