Requirements for Chapter 7 Bankruptcy | How to Qualify for Ch 7 Bankruptcy

Bankruptcy is a legal process that may help you if you have more debts than you can pay. A typical Chapter 7 case is opened and closed within three to six months, and the person filing emerges debt-free except for a mortgage, car payments, and certain types of debts that survive bankruptcy, such as student loans, recent taxes, and back child support.

Chapter 7 Bankruptcy Filing

Chapter 7 is the most common bankruptcy filing. It is also referred to as liquidation. When you file for protection under Chapter 7 of the Bankruptcy Code, you stand to lose your assets. The bankruptcy trustee will take over all your non-exempted assets and liquidate them to pay your creditors.

To qualify for relief under chapter 7 of the Bankruptcy Code, the debtor may be:

individual
partnership
corporation
other business entity.

An individual cannot file under chapter 7 or any other chapter, however, if during the preceding 180 days a prior bankruptcy petition was dismissed due to the debtor's willful failure to appear before the court or comply with orders of the court, or the debtor voluntarily dismissed the previous case after creditors sought relief from the bankruptcy court to recover property upon which they hold liens. If you previously filed a Chapter 7 bankruptcy, you must wait eight years before filing again for a new Chapter 7 filing. If you previously filed a Chapter 13 bankruptcy, you must wait six years before filing a Chapter 7 bankruptc

Credit counseling

Individual debtors must undergo credit counseling through a recognized and approved agency before they can file for bankruptcy. The credit counseling services check out whether debtors can pay at least 60% or more of their debts so that they don't have to file bankruptcy. You must undergo this counseling within the 180 days prior to the filing. During the credit counseling, you will be encouraged to look closely at your finances and make an informed decision whether you really do need to file bankruptcy at all. By doing this, you can better determine if you have missed any viable options for arranging agreements with your creditors and potentially avoiding the more drastic step of bankruptcy altogether.

Means Test

One of the most important changes made to the Bankruptcy law in 2005 requires debtors to pass the “means test”. In summary, the test determines whether a bankruptcy filer has enough disposable income to repay their debts. A person’s whose income exceeds that of their state of residence’s median income will probably not qualify, to file under chapter 7 but rather under chapter 13.

Getting Legal Help

The existing eligibility criteria for filing chapter 7 bankruptcy are very complex. Even a small mistake can prove costly. Your petition can be rejected. Consult with an experienced bankruptcy attorney. The attorney can study your case and let you select the right chapter to file for bankruptcy.

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