What To Do If You Don't Meet Bankruptcy Criteria
Within bankruptcy law, there are specific criteria for filing under the different chapters. However, if you fail to meet these criteria, you might still have several options for getting the court to accept your petition. This is how bankruptcy law services providers typically approach this problem.
Means Testing
Automatic qualification for Chapter 7 bankruptcy is possible if you earn less than your state's median income annually. It is also possible to qualify on this basis if you've had a recent income change that takes your prorated earnings below that threshold.
Chapter 7 filers do have an alternative, though, if they don't qualify based on median income. The court can also conduct a means test. A petitioner will supply the court with information about their assets, liabilities, and income. The judge will then determine if their circumstances justify granting bankruptcy relief.
Filing Under a Different Chapter
Another potential solution is to file using a different type of bankruptcy process. Chapter 13 is the most commonly used alternative for individuals, and Chapter 11 is the analog to it for businesses and some people with higher debt loads. There is also the Chapter 12 process for farmers. Unless you have a business or million dollars of debt, you will probably file Chapter 13 if you wish to restructure.
Each of these three processes requires a restructuring plan. In Chapter 7, a court-appointed trust sells a petitioner's non-exempt assets and pays the proceeds equitably to the creditors. Under a restructuring plan, you ask the court to trim down your debt load. In exchange, your plan should allow you to pay the reduced amount in full within three to five years.
Be aware that means testing is necessary in all restructuring cases. It's wise to retain bankruptcy attorney services to reduce the risk you'll make a mistake that might sink your petition. They can help you present the information about your assets and debts so a judge will understand what your financial situation is.
You should also be aware that you might not be able to restructure if the court decides you don't have the income needed to pay on a plan. In that scenario, though, you'd have a good chance of successfully petitioning for relief under Chapter 7.
A Mixed Solution
One trickier solution is to file for Chapter 7 and then Chapter 13. The idea is that once you've discharged certain unsecured debts under Chapter 7 you will be in a position to pay on a restructuring plan.
