Not everyone qualifies for Chapter 7 bankruptcy. Though most people meet the income requirements, there is a limit to how much you can earn.
Chapter 7 requires you to pass a means test that measures if your family income falls under South Carolina’s median income. According to the United States Census, the median household income is $54,864. Your average household income over the past six months must be less than the current median income.
If you do not pass the first means test, you may qualify for Chapter 7 bankruptcy using another method. This measures your household income and expenses to determine if you cannot pay for your debts. So, people who earn more than South Carolina’s median income may still qualify for Chapter 7 if they prove you cannot afford to pay back creditors. Disabled veterans, active-duty reserves and National Guard members do not have to include their service income. If you fail both means tests, you still might be able to file for Chapter 13.
Business debt does not apply to the Chapter 7 means test. If you run a business and want to file for Chapter 7 to forgive your business expenses, you do not have to pass a means test. However, your total debt must be more than 50 percent business related. Any debt you incur that you can categorize as profit motive driven counts towards business debt.
Passing the means test is the primary qualifier for Chapter 7 bankruptcy. Remember, if you have a business or serve in the military, your income and debts from those areas do not count towards your household income.