Qualifications for Chapter 7 Bankruptcy

Have you recently lost your job, and are you falling behind on your bills?  Have economic changes meant that you may lose your home?  Are you wondering what your options are?  Would you even qualify to file for bankruptcy if your situation came to that and what are the specific qualifications for chapter 7 bankruptcy? Becoming familiar with the qualifications necessary to file for bankruptcy might help you better consider your financial options. 

When to Consider Chapter 7

You might qualify for Chapter 7 bankruptcy if you find yourself: 

• Having some accounts in collections
• Having creditors trying (or about to try) to sue you
• Having no co-signers to help you pay back your debts
• Having insufficient resources to pay off your debts

Legal Requirements to Qualify for Chapter 7

To file for Chapter 7 bankruptcy, you must have: 

1. Gone to credit counseling at least 6 months before you filed for bankruptcy.  Counseling and money courses must have been done at your own expense.
2. Pass the “Means Test,” which indicates that your combined family income is lower than the median income of a comparably sized family in your state.  This test will help determine if Chapter 7 applies, or if some other type of bankruptcy, such as Chapter 13, is more applicable.
3. Not had a Chapter 7 bankruptcy within the prior 8 years or a Chapter 13 within the prior 6 years.  You simply cannot file for bankruptcy every few years to get out of debt.
4. Not had a bankruptcy dismissed by the court within the prior 6 months because you failed to appear in court or you were held in contempt.

2005 Bankruptcy Law Standards

A debtor is to undergo the following specific examinations to determine if they qualify under Chapter 7 bankruptcy.

1. “Determination of Ability to Repay,” you income is entered into a formula that exempts necessary expenses, like housing and food, to decide if you have enough income to pay 25 percent of certain portions of your unsecured debt.
2. “Comparison to State Median Income,” your income is compared to the median stated income of others in your state.

If you make enough money to pay 25 percent of those particular unsecured debts and your income exceeds your state median, you will not qualify under Chapter 7.  You may still be able to file under Chapter 13 bankruptcy statutes.

Getting Help

A qualified bankruptcy attorney can help you to evaluate your situation in order to determine if you are allowed to file for chapter 7 bankruptcy under the law. He or she can also assist you with every step of the bankruptcy process, from dealing with your trustee and creditors to appearing in court.