Do you find yourself falling deeper and deeper into debt, no matter how hard you try to climb out of it? If your bills are stacking up, or if your credit card balance keeps growing to the point where you don’t see a way out, it can be time to look at some options.
One path out is filing for Chapter 7 bankruptcy.
What Is Chapter 7 Bankruptcy?
Chapter 7 bankruptcy, also known as liquidation bankruptcy, is for those who cannot afford to repay debt or make monthly payments toward the debt like during a Chapter 13 bankruptcy. One of the negatives of this form of bankruptcy is that you may need to give up or liquidate some of your assets to pay off some debt. However, in our district, the vast majority of Chapter 7 cases require no contribution of assts to have the debt discharged.
To qualify for Chapter 7 bankruptcy, you need to meet the following qualifications:
You Pass the Means Test
The means test determines whether or not you qualify financially to file for Chapter 7. You need to show that your income is low enough that you cannot afford to make a monthly payment towards your debt, as you would in Chapter 13. In the means test, you need to see how your current monthly income compares to your state’s median income.
For this test, income can include:
- Wages, salary, and tips,
- Bonuses, overtime, and commissions
- Income from a business or a farm
- Interest and dividends
- Rents and real property income
- Child support or spousal support
- Unemployment payments
- Pension and retirement payments
- Workers’ compensation
- Disability insurance
You Cannot Afford to Repay the Debt
You will need to prove that you cannot afford to make payments to your creditors. You will need to do this by showing your disposable income is not high enough to account for the payments. If you can afford to put some money towards your debt, then you will need to file Chapter 13 instead.
You Haven’t Filed for Chapter 7 Bankruptcy Within 8 Years
You are only allowed to file for Chapter 7 bankruptcy once within the past eight years or file for Chapter 13 bankruptcy within the past six years. If you have filed for bankruptcy recently, then you will need to look at other options to get out of debt.
You Haven’t Had a Previous Bankruptcy Case Dismissed Within 180 Days
If you had a previous Chapter 7 or Chapter 13 bankruptcy case dismissed within the previous 180 days due to a court order or a fraudulent case, or if you requested a dismissal after a creditor asked the court to lift the automatic stay, you are not eligible to now file for Chapter 7.
You Completed Credit Counseling
Per the courts, you need to complete a credit counseling course through a court-approved agency within 180 days before filing for Chapter 7 bankruptcy. This class will help you understand what bankruptcy means, and will make you aware of other options to get out of debt. You will receive a certificate upon completing the course that must be submitted to the court with your bankruptcy materials.
If you do not meet any of the above requirements, then you must work with your bankruptcy attorney to determine what the best option is for you. This can include filing for Chapter 13 bankruptcy or looking at other types of debt relief.
Let Us Help You
If you need to file for bankruptcy and are trying to determine if Chapter 7 is the right option for you, let our lawyers at The Law Offices of Alexzander C.J. Adams, P.C. review your options and help you decide what type of bankruptcy is best. We work for you, the people, and not institutions. Contact us for a free case evaluation, or no-obligation consultation. We are dedicated to helping you overcome this small bump in the road and assisting you to get on with your life.