In order to file a Chapter 7 bankruptcy your income needs to be lower than the median income for your family size in Michigan. If your income is lower than the median income you will most likely qualify for a Chapter 7 bankruptcy, as the assumption is that you have no disposable income left over each month to pay your bills. If your income is larger than the median income for your family size, you will need to pass the Means Test to see if you would need to file a Chapter 13 bankruptcy or if you can still qualify for a Chapter 7 bankruptcy.
If your income is lower than the median income in Michigan, there is a presumption that you pass the Means Test and may proceed with a Chapter 7 bankruptcy in most cases. Income includes almost all of sources of income you receive throughout the year. This includes, but is not limited to, business income, rental income, interested and dividends, pensions and retirements plans, amounts paid by others for your household expenses, and unemployment income. “Current monthly income” is your gross income earned over the six calendar months before filing for bankruptcy multiplied by two. You can check the median income for Michigan and for your family size by visiting the U.S. Trustee Program | Department of Justice.
If your income is larger than the median income you will have a second chance to see if you qualify for a Chapter 7. This is called the Means Test. If you need to use the Means Test, your average household income is determined by averaging all of your monthly income sources over the last six calendar months. Once you determine your average monthly income you multiply that by 12 to determine your annual income. You will then subtract your monthly expenses from your income to figure out the disposable income you have each month. It is important to note that there are limits set by the bankruptcy court on certain expenses.
If your disposable income under the Means Test is lower there is a good chance you will qualify for a Chapter 7 bankruptcy. The higher your disposable income, the more likely it will be that you will need to file a Chapter 13 bankruptcy.
There are many different factors that go into determining if you qualify for a Chapter 7 versus a Chapter 13 bankruptcy, so it is important to discuss your options with a knowledgeable bankruptcy attorney. You can contact our office to discuss your unique situation and see if a bankruptcy is right for you.