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Chapter 7 bankruptcy is often referred to as the liquidation chapter of the bankruptcy code. Under Chapter 7, the debtor surrenders non-exempt assets to the Trustee and at the conclusion of the process most debts are eliminated. Under the bankruptcy reform passed in 2005, debtors must pass a means test in order to qualify to file under Chapter 7.

Law Office of Barry W. Rorex, PLC
2 East Congress Street Suite 900
Tucson, AZ 85701
(520) 495-7596
FAX (520) 838-8061

Although many people mistakenly believe that the 2005 changes to the bankruptcy laws eliminated the right to file under Chapter 7 or made it impossible to discharge credit card debts, that is just not the case. The most important change in the new law was the provision requiring new filers to pass a “means” test in order to qualify to file a Chapter 7 bankruptcy. In the vast majority of cases, this qualifying test merely adds another step to the filing process but does not limit the availability of Chapter 7 and does not change the dischargeability of credit card debt.

There are several ways to “qualify” under the means test. The initial consideration is a comparison of the debtor’s income to standardized averages. For each state, an average income is published based on the number of people in the debtor’s household. If the debtor’s income is less than the state threshold amount, no other calculation is required and the debtor can file either a Chapter 7 or Chapter 13 bankruptcy. If the debtor's income exceeds the state number, further calculations are required to determine eligibility. If, after applying all of the allowed adjustments, a debtor still does not qualify, then filing under Chapter 7 is prohibited and the filer must use Chapter 13.

For your convenience The Law Office of Barry W. Rorex offers a Means Test Calculator where you can input your financial data directly to get an idea if you qualify to file under Chapter 7. Simply select your zip code and the calculator will automatically determine the proper state numbers used to determine your eligibility.


For those eligible to file under Chapter 7, most unsecured debts are dischargeable. This includes credit card debt, medical bills, personal loans and most lines of credit, many judgments and lawsuits. There are some types of debt that cannot normally be discharged in bankruptcy such as most tax debt, student loans, court imposed fines and personal injury judgments. Because there are many exceptions to the non-dischargeable debts, any of these should be discussed thoroughly with a bankruptcy attorney.

The downside to Chapter 7 for many debtors is that assets are treated harshly. After applying all of the various exemptions, any assets with value can be seized by the Chapter 7 Trustee. Secured obligations such as motor vehicles and real property, must still be paid or may eventually be recovered by the secured lender.

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