Qualifying for Chapter 7 Bankruptcy

Every person that files bankruptcy does not necessarily qualify for Chapter 7 bankruptcy. Under Chapter 7 bankruptcy, the unsecured debt of the person filing is discharged after all of the person’s non-exempt assets are liquidated and the proceeds are used to pay off their creditors.

A Bankruptcy Lawyer can better explain which type of bankruptcy best fits your financial situation. Below is a little information about the process used to determine eligibility to file Chapter 7 bankruptcy.

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The first step in the means test is to determine the median income level for your area. Disabled veterans whose debts were incurred during active duty and people whose debts come primarily from the operation of a business get a fast pass to Chapter 7, and are exempted from the Means Test.

If your average income during the previous 6 months is less than the median income for your area, you are automatically eligible for Chapter 7. If, however, your income is more than the median, then you must continue the means test to determine what the amount of your disposable income is and if it is sufficient to meet debt repayment terms. A qualified bankruptcy attorney can guide you through this process and help you decide which option is best for you.

Another provision of the new law says that you cannot file for Chapter 7 bankruptcy if you obtained a discharge of your debts in a Chapter 7 case within the previous 8 years, or a Chapter 13 Bankruptcy case within the previous 6 years.