This can be a means by which financially overstressed persons may reset their debt problems to a manageable state. Unfortunately, not all individuals qualify automatically. The laws of bankruptcy in the U.S. are strict enough to allow only those who can never repay their debts to avail of this kind of relief. +
Key Qualifications To Provide Insight Into Whether You Need Chapter 7 Bankruptcy
1. The Means Test
The means test is the first, and perhaps the only, big test for qualifying for Chapter 7 bankruptcy. It tests household income against the median income for a household of that size in that state.
If your income is below the state median, you automatically qualify, more or less. Above, you are allowed to deduct certain expenses (like housing, medical costs, and taxes) to arrive at disposable income.
The means test is meant to ensure that Chapter 7 is truly for those who simply do not have any means whatsoever to repay their debts. Once again, if your disposable income is found to be too high, you may be inclined toward Chapter 13, which, in essence, turns out to be a repayment plan.
2. Type of Debt That You Have
Chapter 7 bankruptcy mainly wipes out unsecured debts, which include:
- Credit cards
- Hospital bills
- Personal loans
- Utility bills
If a large part of your debt is secured (such as mortgages or car loans), Chapter 7 would not be great for you unless you want to walk away from the property that is tied to those loans.
3. Past Bankruptcy Filings
There are limits on how many times you can apply for bankruptcy; if you were discharged in Chapter 7 within the last eight years or in Chapter 13 within six-you must wait before filing again.
4. Honesty and Full Disclosure
The bankruptcy process requires complete transparency on your part. You must disclose all assets, income, expenses, and debts in your petition. Concealing property or lying about it leads to the denial of your discharge or imprisonment.
This article was written by Alla Tenina. Alla is one of the best bankruptcy attorney in Sherman Oaks and the founder of Tenina Law. She has experience in bankruptcies, real estate planning, and complex tax matters. The information provided on this website does not, and is not intended to, constitute legal advice; instead, all information, content, and materials available on this site are for general informational purposes only. Information on this website may not constitute the most up-to-date legal or other information. This website contains links to other third-party websites. Such links are only for the convenience of the reader, user or browser; the ABA and its members do not recommend or endorse the contents of the third-party sites.
