If your household income is above the median income level, it is not an automatic preclusion from access to a Chapter 7. When the Bankruptcy Abuse Prevention and Consumer Protection Act was enacted in 2005, a means test was implemented to create guidelines to determine whether a bankruptcy filer has the ability, after taking into consideration income and reasonable monthly expenses, to repay a portion of his/her liabilities through a Chapter 13 repayment plan. If necessary monthly expenses do not allow room for a repayment plan, Chapter 7 may still be a viable option.
Most necessary living items are protected by state statute from liquidation by a Trustee who is the case administrator. There is a monetary cap for each necessary item that must be considered (i.e. $3,000 of protection of household goods, etc.). Careful consideration and planning is essential to obtaining the most favorable result.
While a Chapter 7 is a great path to obtain a fresh start, some items like mortgage arrears, second mortgages, and back tax liability must be closely scrutinized to determine whether a 7 is the best option considering your personal circumstance.