Am I Eligible for Chapter 7 Bankruptcy?

Chapter 7 is the most common type of bankruptcy chosen by personal debtors, and for good reason. A chapter 7 bankruptcy case can be completed in as little as 60 days, and eliminates most common types of unsecured debts that can bury someone in a lifetime of monthly payments.

There are eligibility requirements for a chapter 7 bankruptcy though, most notably the income requirements.

Chapter 7 Income Requirements

Many people have heard about the means test, which is a requirement for those debtors whose income is above their states median income. When the petitioners income is greater than this median, they are said to be “presumed abusive”, meaning the courts assume they should be able to repay their debts.

If the petitioners income raises the presumption, then he or she will need to pass the means test which is a rather complex set of paperwork that is designed to determine if, based on the income and expenses, the debtor should be able to repay debts over a period of five years.

If the means test is not passed, then the chapter 7 petition will likely be denied and the petioning debtor will be required instead to file for a chapter 13 restructuring.

Other Considerations

Aside from the income requirements, the debtor also will be unable to file for chapter 7 bankruptcy if he or she, within the previous 7 years, has filed a chapter 7 case. A chapter 13 on the other hand, can be filed much more frequently.

Getting Approved

For debtors with an income above the median for their state, it’s a good idea to hire an experienced bankruptcy attorney to work out a legal strategy if a chapter 7 case is the best option for their financial situation.

Talk to a bankruptcy lawyer before making any decisions regarding bankrutpcy to ensure a good case is not dismissed.