How do I know if I am eligible to file Chapter 7 bankruptcy?

Related Ads


How do I know if I am eligible to file Chapter 7 bankruptcy?


Chapter 7 bankruptcy became much more restricted after 2005 changes to the bankruptcy code. Chapter 7, or total liquidation bankruptcy, allows you to wipe out unsecured debts. The process begins with your filing and completing all the paperwork, including listing all of your assets. Assets that can be seized (most of them, except for your retirement accounts and some of the equity you might have in your house) are seized and sold to get money to pay the creditors. Any remaining balance on the eligible debts is then forgiven.

To be eligible for chapter 7 bankruptcy, you must either:

  • Make below the median income in your state (this number, obviously, varies form place to place depending on where you live) OR
  • Pass a means test. This test involves the court looking at your income, obligations and debts. If your income is low enough that it is not feasible that you can pay a portion of your debts back each month and still have a sufficient amount of cash left over to provide for your basic needs, then you are eligible for a chapter 7 even if your income is above the state median

If you are not eligible for a chapter 7, you may be limited to a chapter 13 or "wage earners" bankruptcy.

To determine your eligibility and for help filing Chapter 7 bankruptcy, you should strongly consider speaking with an experienced attorney for help.