Most people who walk through our doors hope to file Chapter 7, the type of bankruptcy that wipes out unsecured debt entirely. But if your income is above a certain threshold, Chapter 7 may not be available to you. The alternative is Chapter 13 — and for many families, it actually works out fine.
How Chapter 13 Works
Chapter 13 is essentially a court-supervised debt consolidation plan. All of your qualifying debts roll into one monthly payment for three to five years. At the end of the plan, any remaining qualifying balance is discharged.
Crucially, you often pay back less than you owe. The plan payment is based on your disposable income after necessary expenses — not the total debt amount.
The Means Test
The means test is the formula that determines which chapter you can file. It looks at your gross income over the last six months, your household size, and allowed expenses including taxes, mortgage or rent, car payments, and child support.
An Example
A married couple in St. Louis earning $70,000 with $80,000 in debt may exceed the Chapter 7 income limit. In Chapter 13, that same couple might pay $300/month for five years — totaling $18,000 — and have the remaining $62,000 forgiven.
Every case is unique. Call us and we'll run the numbers for free.