One of the first decisions to make after determining that filing for bankruptcy is your best option is whether to file under Chapter 7 or Chapter 13. For most filers, that determination is made when they either pass or fail the means test.
Those who pass it are free to file under Chapter 7. But one often overlooked fact is that under some circumstances, those who do not pass the means test may still be able to file a Chapter 7 and not a Chapter 13 bankruptcy.
How that might work for you
The means test is usually the gold standard of bankruptcy courts, as those filers who earn too much money, have too many assets they want to keep or too much disposable income must then file under Chapter 13. But like most aspects of the law, there are exceptions. These include the following:
- Disabled vets who incurred debt during active duty or while defending the country with their activities.
- Debtors who accrued bills related to business operations.
- There are exigent circumstances, e.g., very high rent, a recent spate of unemployment or serious medical diagnoses.
Those who decide to file under Chapter 7 after failing the means test must be prepared to explain why the expense (rent) is necessary. They must also provide documentation of the special circumstances for which they are claiming the exception.
Will the court grant the exception to file under Chapter 7?
Anyone with experience practicing law will tell you that there is no way to guarantee how a court will rule in any case. Bankruptcy courts are no exception. Certainly, the better the reason for the exception, coupled with the documentation to back up your argument, the greater your chances of winning your case to file under Chapter 7.
Learning more about your rights under the law will help you prepare when filing for bankruptcy.