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When I declared chapter 7 bankruptcy I learned a lot about how much money I could make, what expenses I could have, and what items I could keep.
The Means Test
I found out that the means test in bankruptcy is the amount of yearly income I could make in order to qualify for chapter 7 bankruptcy. The rules in every state are different and a lot of it depends on how many people are in your household. I qualified for chapter 7 because my income was below the median income for my state. The U.S. Department of Justice has a document on their website that lists current income limits for every state.
Expense Limits
There were limits to various expense categories I had. Some of these are national standards and others are dependent upon where you live. Since I owned my own part-time business, there were limits on how much I could spend for business expenses. There were also limits in food, clothing, housing, and transportation costs. All of my expenses were within reason so I did not run into any issues with any of my expense categories.
Exemption Limits
There were limits to how much of my household goods I could keep. I had to go through everything that I owned and assign it a monetary value. From clothes to the more expensive items like jewelry, I had to give numbers to all of my possessions. I learned that there are limits to how much you can keep within certain categories. If I had owned much more jewelry than my engagement ring, the court would have taken at least some of my jewelry. In some areas, there are limits to how much any one item can be worth. How much your automobile is worth can also be a factor. My car was not worth enough for this to be a problem for me. I was able to keep all of my household items since how much they were worth was below the amount allowed in my state.
I had money in a 401(k) so it was safe from being taken during my bankruptcy proceedings. There were other accounts I had a few years earlier like stocks and an IRA that likely would have been taken during my bankruptcy had I still had them. Not all retirement accounts are exempt from bankruptcy so it is a good idea to check with a qualified bankruptcy attorney in your area to see what you can and cannot keep.
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