Filing Chapter 7 Bankruptcy

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To those who have overwhelming debt and are suddenly facing a drastic cut in income, filing for bankruptcy may seem like a welcome relief, and it may be the only answer to their money problems. However, in the past too many people who had the ability to pay their debts chose not to pay them and instead filed for bankruptcy. As a result, new laws have been enacted that make it more difficult to file Chapter 7 bankruptcy, which is the type that basically discharges all debts. If you are looking at bankruptcy as an option, you should know whether or not you qualify for Chapter 7 bankruptcy.

Disabled veterans and business owners have certain exceptions that may make it easier for them to file Chapter 7 bankruptcy, but everyone else must meet some stringent requirements. The first requirement they must pass is the income requirement. In order to make the rule uniform, debtors now can only file Chapter 7 if their current monthly income, which is the average over the six months before filing bankruptcy, is less than or equal to the median income for a family of the same size in that state.

People whose income is higher, however, still may be able to file Chapter 7, provided they can pass the "means test." The means test is used to determine whether or not the debtor can reasonably repay the debt. The means test is a bit complicated, but in general it determines whether you can repay your debt if new repayment guidelines are put in place. Your bankruptcy attorney will be able to help you determine whether or not you will pass the means test.

You may not be eligible to file bankruptcy if you have filed Chapter 7 in the past eight years or Chapter 13 in the past six years. Also, if you have a bankruptcy case that was dismissed in the 180 days prior to the time you file, you cannot file again. If the court thinks you have tried to defraud your creditors by concealing assets, you may have your case dismissed, even if you otherwise qualify. For this reason it is essential that you are honest and open about your assets if you are trying to qualify for Chapter 7 bankruptcy protection.

If you qualify for Chapter 7 bankruptcy protection, you give yourself the chance to eliminate your debts and begin rebuilding your financial stability. Keep in mind that bankruptcy will stay on your credit report for as long as 10 years, so do not take this step without much consideration. If there is no way out of your situation and you do qualify, then talk to a bankruptcy attorney about filing Chapter 7 protection.