Who makes the choice regarding filing a Chapter 13?

In order to make the choice regarding Chapter 7, first, I'd recommend you consult with an experienced bankruptcy attorney to determine if you qualify for Chapter 7 and if it's the best option for you. If you do qualify for Chapter 7, you could then choose to file the Chapter 7 bankruptcy. Ultimately, it's up to the court to determine whether you do qualify and whether you meet all the requirements for a Chapter 7 discharge.

Additional Information:

The bankruptcy court uses a congressionally imposed Means Test to determine if a debtor is qualified to file either a Chapter 7 or 13 case. The means test compares the debtor’s average income over the past six months with the median income where the bankruptcy is filed. The purpose of the means test is to limit those with higher income from filing a Chapter 7 when a Chapter 13 is more appropriate. Also, it is used to more uniformly allow certain expenses when calculating disposable income when determining the amount of the Chapter 13 payment plan.

If most of your debt is business debt, the Mean Test can be avoided however. The means test is only required for those whose debts are primarily consumer debts. If a debtor has more than 50% business debts, the debtor does not have to apply the means test.

To determine what qualifies as a business debt versus a consumer debt – consumer debts are those debts incurred mainly for personal, family, or domestic purposes. A debtor’s home would be considered a consumer debt. However, if the home purchase was intended as an investment and rental, then it would fall under a business debt.

More information about the Means Test and how it applies to certain types of debts can be found on our website.