Qualifying for Chapter 7 Bankruptcy

Chapter 7 bankruptcy is a type of bankruptcy in which certain property is sold and then used to repay debts. If there is no property that can be resold, many of the debts will be discharged or canceled once the bankruptcy case concludes.

Some criteria you must meet to qualify for a Chapter 7 bankruptcy:

Bankruptcy means test

This test compares the state’s median monthly family income to your family’s income. You may not be able to file Chapter 7 bankruptcy if your monthly income exceeds the state’s median income. This test is required if more than half your debt comes from consumer purchases other than business, tax, or tort debts (debts for injuries or damages you caused to someone else).

You are an individual, married couple filing jointly, or small business owner

No recent bankruptcy discharge

You are not legally able to file Chapter 7 bankruptcy if you had a previous Chapter 7 bankruptcy discharge within the past 8 years, or a Chapter 13 bankruptcy discharge within the past 6 years. The filing period starts the date your previous bankruptcy was filed, rather than when the bankruptcy was discharged.

No recent bankruptcy dismissal

You are not able to file Chapter 7 bankruptcy if you had a bankruptcy dismissed within the past 180 days for any of the following reasons: you violated a court order, abused the bankruptcy system, made a fraudulent bankruptcy filing, or requested a dismissal because a creditor requested the automatic stay be lifted.

Credit counseling required

To be able to file any type of bankruptcy, you are required to receive credit counseling from a government-approved credit counseling agency. You are not required to get counseling before filing bankruptcy, but it must be completed no more than 180 days prior to the bankruptcy discharge and it must include a two-hour financial management course.

Agencies offering this management course aren’t always non-profit, but they should be able to offer free or lower-cost services.

Your bankruptcy case will be dismissed if you do not go through credit counseling within the specified time frame.

Seek an attorney’s advice

Seek professional advice from a bankruptcy attorney to help you determine if you qualify to file for bankruptcy.

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