Whether you have struggled under the burden of debt for some time or an unexpected event like a medical emergency has left you with mounting medical bills, bankruptcy could offer relief. When filing, though, it is important to determine whether Chapter 7 or Chapter 13 bankruptcy is the best option for your case.
Because Chapter 7 bankruptcies offer debt forgiveness, individuals filing for this bankruptcy must meet specific guidelines. Do you qualify for debt relief under this chapter of bankruptcy?
Do you earn less than the median income in your state?
Chapter 7 bankruptcies are primarily for people struggling to pay off debt with a lower income, so those filing must pass a “means test” to determine whether they qualify for this chapter of bankruptcy. There is no nationwide income limit for Chapter 7 bankruptcy because the cost of living varies depending on your location. Instead, incomes that are less than the state’s median income automatically pass the means test.
If you earn more than the medium income, what is your disposable income?
If your income is higher than your state’s median income, you will need additional documentation to show that your disposable income is low enough to qualify. This starts with documenting your monthly expenses and deducting certain required expenses like rent and medical costs from your total income. If the resulting disposable income is low enough, you qualify for Chapter 7.
Have you had a recent bankruptcy discharge or dismissal?
The government places limitations on how often individuals can receive debt relief through bankruptcy. If a previous Chapter 7 or Chapter 13 bankruptcy was discharged in the past several years, you may not qualify for another bankruptcy for some time. You also cannot have had a bankruptcy dismissed in the past 180 days.
What are your options if you do not qualify for Chapter 7 bankruptcy?
Whether your current disposable income is too high to qualify for Chapter 7 bankruptcy or you do not qualify because of a past bankruptcy discharge, you may be able to wait and file for bankruptcy after some time has passed. For example, if you fail the means test now, your circumstances may change and you may qualify in the future.
If you do not qualify for Chapter 7 bankruptcy because of the means test, you may be able to file for Chapter 13 bankruptcy to get immediate debt relief.
If you wonder whether you meet the requirements for Chapter 7 bankruptcy, speak to a bankruptcy attorney. They can explore the debt relief options available to you and help lift the burden of debt in your life.