What Kind of Bankruptcy Should You File?

A mathematical formula—called the means test—determines whether you qualify for bankruptcy in California.

Do You Qualify for Bankruptcy in Kern County, California?

Updated: 2020-06-23 by

You may be surprised to learn that whether you can file for bankruptcy can come down to which state and county you live in.

Which type of bankruptcy you qualify for depends, in part, on whether your annual income is more or less than the California median income. Before looking at numbers and formulas, however, you should be familiar with the two main types of personal bankruptcy:

Chapter 7 Bankruptcy

Chapter 7 allows you to eliminate most unsecured debts in a matter of months in return for giving up all property that is not exempt. (Unsecured debts are debts—like credit card charges or medical bills—that aren’t backed up by specific items of property as collateral.)

Most people who file for Chapter 7 bankruptcy have little available property to cover what they owe. What property they still own when they file for bankruptcy is either protected by California exemption laws or pledged to a secured creditor as collateral for a debt, and therefore not available to pay off unsecured creditors. These are known as "no asset" bankruptcies.

Chapter 13 Bankruptcy

Chapter 13 requires you to repay a portion of your debts over three to five years. During that time, you must live within a strict budget that is monitored closely by a bankruptcy court trustee. If you don’t make the required monthly payments, the Chapter 13 bankruptcy fails and you still owe your debts—unless you are able to convert to a Chapter 7 bankruptcy.

Chapter 13 is commonly used by people who are behind on secured debt payments (e.g., mortgages) and want to propose a Chapter 13 plan to catch up on these payments over time.

Which Type of Bankruptcy Is Available to You?

A mathematical formula—called the means test—establishes the kind of bankruptcy you qualify for. (The means test is set out in Section 707(b)(2) of the bankruptcy code.) The means test considers:

  • how your monthly income compares to the California median income
  • the amount and types of your debts, and
  • other aspects of your financial situation.

If your annual income is less than the California median income for your household size, then you can choose whether to file for Chapter 7 or Chapter 13, assuming you meet other qualifications. On the other hand, if your income is higher than the state median, you must first calculate your expense deductions to estimate your “disposable income” for the next five years. The result of this calculation determines whether you can file for Chapter 7 bankruptcy or are left with Chapter 13 as your only option.

California Median Income

If your average monthly income for the past six months is below the California median income for your household size, below, you meet the requirements of the means test and you meet the first threshold for Chapter 7 bankruptcy.

Note that the means test is just one of several hoops you must jump through to qualify for Chapter 7. Even if your income is low, a judge may block you from filing Chapter 7 if it appears that you have enough income or property to repay a substantial portion of your debts under a Chapter 13 plan.

More Information

You can use our free Bankruptcy Means Test Calculator for Kern County (based on Official Form 22A) to do the math and learn how you would fare under the means test. The calculator is completely anonymous: You can use it without disclosing your name, email address, or any other identifiable personal information.

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