Can I Qualify For Chapter 7 If I Fail The Means Test in California? Yes!

Passing a difficult means test will be the topic for another blog post (for those that are over-median earners), but for the purposes of this post, I focus on those who presumably make too much money to qualify for the garden variety Chapter 7 bankruptcy but have found themselves in the unique position to still qualify because of the nature of their debts.

Case in point, for those who have incurred a majority (this means 51%) of their debts and can classify such as non-consumer debts, then you have a good chance of avoiding the means test and income strictures placed on debtors in a Chapter 7.

Put another way, those whose debts are primarily non-consumer in nature (think business debts, tax liabilities, tort judgments assuming they survive 523 objections) are exempt from showing that they exhaust their income in either the means test (form 22) or on Schedules I and J. What does this mean? Simply put, you can have disposable income (money left over, potentially lots, after all necessities are covered) and still not be required to pay back a dime to your dischargeable creditors under a Chapter 7.

There are several issues that arise when making a legal determination regarding the classification of debts and whether a non-consumer Chapter 7 will survive bad faith allegations, but the 9th Circuit (California) offers some encouraging legal decisions to help clear up the muddy waters.

Avoiding means test when filing a non-consumer Chapter 7 will not, however, save a debtor with non-exempt assets. Since California applies quite generous exemptions on a debtor's assets, chances are the debtor may be able to keep everything they seek to keep and get rid of all which they do not.

Have Questions? Get in Touch.

    728 E Chapman Ave.
    Orange, CA 92866
    765 N Main St #131-B1
    Corona, CA 92878
    The information on this website is for general information purposes only. Nothing on this site should be taken as legal advice for any individual case or situation. This information is not intended to create, and receipt or viewing does not constitute, an attorney-client relationship.
    © Copyright 2024 Barrios & Machado Personal Injury & Accident Lawyers PC. All Rights Reserved.
    phone linkedin facebook pinterest youtube rss twitter instagram facebook-blank rss-blank linkedin-blank pinterest youtube twitter instagram