Can I file Chapter 7

In order to file Chapter 7 bankruptcy, a person must meet certain eligibility requirements. It’s important to remember, though, that even those who cannot file for Chapter 7 may qualify for protection under Chapter 13 of the U.S. Bankruptcy Code.

Chapter 7 bankruptcy requires filers to meet the following criteria.

The Chapter 7 Means Test

Passing the Chapter 7 means test is a non-negotiable part of qualifying for Chapter 7 bankruptcy. It involves a few calculations:

  • Median income comparison: First, potential filers compare their household income to the median income of a family their size in their state. Those with incomes lower than the median pass. Those with incomes higher than the median move on to step two.
  • Disposable income calculation: This step requires filers to deduct from their monthly income the federally defined “allowable” expenses. If the amount left over is less than $100 per month ($6,000 for five years), the filer passes the test and may be eligible to file Chapter 7. If the amount is greater than $10,000 over five years, the filer does not pass. If the amount falls between the two, another calculation is needed.
  • Unsecured debt comparison: In the final step of the Chapter 7 means test, filers compare their disposable income to their unsecured, non-priority debts. This step can get pretty complicated. Working with an attorney can help filers avoid legal confusion and mistakes.

 

Pre-Filing Requirements

Another hurdle for those who want to file for Chapter 7 bankruptcy is the completion of the credit counseling briefing. In fact, the credit counseling session is required for anyone who wishes to file for bankruptcy, regardless of the chapter.

The credit counseling briefing was introduced by the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) of 2005. Its goal is to make sure filers meet with a professional credit counselor who can examine their finances and help them determine whether any bankruptcy alternatives (like debt settlement, credit counseling or debt negotiation) could reasonably work for them.

This, in turn, helps make sure that bankruptcy protection is reserved for those individuals who truly need it. The important thing to remember about credit counseling is that it must be completed within 180 days (about six months) of the beginning of a bankruptcy case.

Waiting Period for Multiple Bankruptcy Filings

Some people may need to file for bankruptcy more than once, but filers must wait a certain number of years between filings. Specifically:

  • If your previous bankruptcy was a Chapter 13: The waiting period between Chapter 13 and Chapter 7 bankruptcy is four years, assuming the filer paid less than 70 percent of debts in the Chapter 13 case.
  • If your previous bankruptcy was a Chapter 7: Filers must wait eight years between two Chapter 7 cases. However, if the first Chapter 7 case was dismissed without a discharge, the filer may be eligible submit a second case at any time.
  • If you want to convert: Some filers submit a Chapter 13 case and then become unable to make payments according to their repayment plan. In this situation, filers are sometimes permitted to convert their Chapter 13 to a Chapter 7 case. This is a complicated legal maneuver, though. A bankruptcy lawyer can help determine whether you would benefit from this and whether you qualify.

Is Chapter 7 Bankruptcy Right for Me?

No two people are alike and no two financial situations are alike. If you’re interested in learning whether or not Chapter 7 bankruptcy would make financial sense for you, consider speaking with a bankruptcy lawyer.

A legal consultation can help you determine whether bankruptcy makes sense given your situation, which type of bankruptcy is most likely to benefit you and how to prepare for bankruptcy (if you choose to file).

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