Do I qualify for Chapter 7 bankruptcy in Alabama?

If you’re struggling with credit card balances, medical bills, personal loans, or other overwhelming debt, you may be wondering: Do I qualify for Chapter 7 bankruptcy in Alabama?

The answer is that you may qualify, but eligibility depends on more than simply how much money you earn. Your income, household size, expenses, debts, and overall financial circumstances can all play a role.

In this article, we will explain how Chapter 7 qualification works in Alabama, what the means test is, why income alone does not always decide the answer, and what other options may be available if Chapter 7 is not the best fit for your situation.

1. The Chapter 7 Means Test

One of the main factors used to evaluate Chapter 7 eligibility is the means test. For individuals with primarily consumer debts, the means test helps determine whether filing Chapter 7 would be considered an abuse of the bankruptcy system.

The first part looks at your “current monthly income” and compares it with the applicable median income for a household of your size in Alabama. Current monthly income generally refers to your average monthly income during the six calendar months before your bankruptcy case is filed, subject to certain exclusions.

However, earning more than Alabama’s median income does not automatically mean you cannot file Chapter 7.

2. What If Your Income Is Above the Median?

If your income is above the applicable median, an additional means-test calculation may be required. This calculation considers certain allowable expenses and other financial obligations to determine how much disposable income may be available to repay unsecured debts.

That is why Chapter 7 eligibility cannot always be determined by looking at one income number online. Your household size, allowable living expenses, secured debt payments, and other circumstances can affect the calculation.

3. Alabama Income Guidelines Can Change

The median-income figures and expense standards used in the means test are updated periodically. This means an online calculator or article you found months ago may be using outdated information.

4. What If Chapter 7 Isn’t the Right Option?

Not qualifying for Chapter 7 does not necessarily mean bankruptcy cannot help.

Depending on your circumstances, Chapter 13 bankruptcy may provide another path to financial relief. Chapter 13 allows eligible individuals with regular income to reorganize their debts through a court-approved repayment plan and can offer options for addressing past-due obligations over time.

The best option depends on your individual financial situation.

Understanding Your Options

If you’re considering Chapter 7 bankruptcy in Alabama, avoid ruling yourself out based only on your salary or an online calculator.

At the Alabama Bankruptcy Relief Center, we can review your income, expenses, debts, and other circumstances and help you understand which bankruptcy option may make the most sense for you.

Contact us at 205-875-8197 or visit our online booking page to schedule your free case evaluation and discuss your options. You don’t have to figure out the bankruptcy process on your own.