“I owe a lot in taxes. Is that considered the kind of debt that will disqualify me from Chapter 7?”
Well, the short answer, and the very good news is, that is not considered consumer debt. The general rule is that if you have even 51 percent of your debt as consumer debt, then you have to deal with the means test if your income is above the median income for your state.
Now, consumer debt is defined as debt that was incurred primarily for personal, family, or household use. Bankruptcy courts around the country have determined that taxes do not fit into one of those three categories, therefore, if the majority of your debt or if enough of your debt is in tax obligations so when it’s added to your other non-consumer debt, non-consumer debt is 51 percent or higher, then you don’t have to worry about your income, you don’t have to worry about the median income, you don’t have to worry about the means test, and you’ll qualify for Chapter 7