Am I Eligible To File For Bankruptcy Under Chapter 7 Bankruptcy Laws?
Bankruptcy is a way that you can wipe out your unsecured debts and give yourself a much needed fresh start. Not everyone is eligible for using Chapter 7 bankruptcy though. Here is what you need to know to find out if you qualify.
Do You Have A History of Previous Bankruptcies?
There is a waiting period between bankruptcy filings to prevent it from being abused. If you have previously filed for Chapter 7 bankruptcy, there is an 8 year waiting period until you can file for Chapter 7 again.
If you have filed for Chapter 13 bankruptcy, you will need to wait 6 years before applying for Chapter 7. This 6 year waiting period can be bypassed in a couple of situations. If you have completely paid back at least 70% of your unsecured debts, the rest of the debt may be discharged in good faith due to you making regular payments. If you have paid back 100% of your unsecured debts, you are free to apply for Chapter 7 bankruptcy.
Thankfully, this waiting period only applies if you applied for bankruptcy and had your debts discharged. If you previously applied for bankruptcy and were denied, you are welcome to apply again any time if you feel you now meet the eligibility requirements.
Did You Receive Credit Counseling?
Chapter 7 requires the completion of a course on credit counseling before filing, and it must be done within 6 months of your filing date. The course must be approved by the U.S. Trustee's office in order to qualify.
These credit counseling courses do cost money, but only if you can afford them. If you cannot afford to take the course, it will be offered for a reduced cost or free.
Did You Take A Means Test?
It's possible that you cannot file for bankruptcy because you are making too much money. A means test will be used to determine if you are eligible to file for bankruptcy.
The gross income for your household over the past 6 months is compared to the average income of other similar families in your area, as determined by the IRS. If your income falls below the average income, you can apply for Chapter 7 bankruptcy.
Even if you are above the average income level, it's still possible to qualify by taking deductions. For example, a large mortgage can be used to lower your income level so that you can qualify.
The best way to ensure that your bankruptcy filing goes smoothly is to work with an attorney (such as one from Morrison & Murff). They will walk you through the whole process, and let you know if you are eligible.