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Filing for bankruptcy under the provisions of Chapter 7 of the bankruptcy code can help those in a desperate financial situation get out from under their debt burden and make a fresh start in life. Not everyone who wants to file under chapter 7, the most common type of bankruptcy, will meet the eligibility requirements. Nor is all debt eligible for discharge under current bankruptcy laws. The following article looks at this topic in more detail.
Test
Your monthly income is an important factor in determining whether you are able to file for Chapter 7 bankruptcy. For example, every state has a means test that determines if you can file. If your monthly income is below the median average income for a household the same size as yours, you qualify based on income.
If your monthly income is above this median average, then the bankruptcy court will look at your income compared to your monthly expenses. If the court finds that your disposable income allows you to make full or partial payments to your creditors, it might not let you file for Chapter 7 bankruptcy but move your case over to Chapter 13. Under Chapter 13 rules, you pay off your creditors in installments, rather than having the debt discharged. A key point regarding the means test for Chapter 7 is that some people are exempt. For instance, if your debt is mostly business debt, such as outstanding business loans instead of consumer debt like credit card obligations, you may be exempt from having to go through the means test. Also, if you are a disabled veteran, you may also be exempt from the test as long as certain conditions are met.
Discharge Eligibility
Not all debt is eligible for discharge through the Chapter 7 bankruptcy process. Most unsecured debt, such as a loan not secured with collateral, are generally eligible. Certain taxes, alimony and child support payments, most student loans, and court fines and penalties are not dischargeable. Also, if you do not list a creditor in your bankruptcy filing papers, that debt will not be discharged in most instances.
You may not be able to eliminate a debt if the bankruptcy court determines that you obtained a loan or asset by fraud or that you have attempted to hide assets from your creditors.
For more information concerning Chapter 7 bankruptcy eligibility or to learn more about the bankruptcy process generally, contact a qualified bankruptcy attorney, like those at Phoenix Law.
Share21 February 2019
