Do I Qualify for a Chapter 7 Bankruptcy?

The 2005 changes to the bankruptcy code established mandatory qualifications when filing Chapter 7.
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Oct. 23, 2012 - PRLog -- Many people have heard of the bankruptcy chapters, but are not sure what they mean.  When a consumer decides to file for bankruptcy, there are 2 options: Chapter 7 and Chapter 13. There are stark differences between these two bankruptcy chapters and what they offer.  Most people prefer to file a Chapter 7 bankruptcy over a Chapter 13 because it fully wipes out all unsecured debt. However, certain qualifications must be met in order to file a Chapter 7.

As a result of the 2005 amendments to the bankruptcy code, to qualify for a Chapter 7, an individual must not exceed a certain income threshold.  How much income is considered too much? You need to first compare your average gross income for the previous 6 months to your state’s median income level as denoted by the Department of Health and Human Services.  If you are below your state’s median income, you qualify for a Chapter 7. If you exceed your state’s median income, it does not mean you are disqualified from filing a Chapter 7 bankruptcy, however, you will need to do more complex calculations using the Means Test to determine if you qualify.

Income is the first step in evaluating if you qualify. Next, you need to review the exemptions allowed by your state. A Chapter 7 is considered a liquidation bankruptcy. As a result, all non-exempt property is liquidated and the proceeds are used to repay your creditors. For example, if you own property that is not exempt by any exemption sets allowed by your state, you may have to file a Chapter 13 bankruptcy rather than a Chapter 7 bankruptcy, to protect your property.

Income and exemptions are the two main factors to consider when analyzing if you qualify for a Chapter 7 bankruptcy. Prior to filing either a Chapter 7 or a Chapter 13 bankruptcy, you are required to complete a counseling session with This session will provide further information on both chapters; qualification requirements and the type of relief they offer.
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