Do You Qualify for Chapter Seven Bankruptcy?
One of the most popular questions we receive from clients is “do I qualify to file a ch 7 bankruptcy?” Bankruptcy courts and laws can be confusing to someone who hasn’t been through the process, especially discovering eligibility thanks to the new bankruptcy laws. Wondering if you qualify for ch 7?
Individual – In order to file ch 7, you have to be an individual, businesses are not eligible. You can be married or single. You do not have to file with your spouse if you are married. If you file without your spouse you will still have to disclose their income in order to determine if you are eligible to file chapter 7.
Income – The chapter 7 means test will see if you have available income accessible to pay some or all of your debts. If your income is beneath the state median for your family size, as established by the bankruptcy guidelines then you are eligible for ch 7.
You can still qualify for chapter 7 if your income is higher than the median in your state by showing your living expenses. Your living expenses will then be compared to standard allowances the IRS has ordered for housing, groceries and other normal expenses. If you have other expenses that are necessary to live such as special medical needs, these can also be included to lower your disposable income.
If you are left with over $10,000 in disposable income you cannot file a chapter 7 bankruptcy, but if it’s less than $6000 you qualify. If it’s between $6000-10,000 and you can pay at least 25% of your unsecured debt then you do not qualify for ch 7, if you cannot pay at least 25% then you can file chapter 7 bankruptcy. As you can see, the means test is confusing if you have disposable income because your income is higher than the median, so you should discuss your eligibility with a bankruptcy attorney.
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