Chapter 7 Bankruptcy Laws & Rules on Exemptions Allowed

The rules regarding Chapter 7 bankruptcy requirements are governed by the laws of the state where you reside, meaning that the specific filing requirements and allowable exemptions vary by state. Nonetheless, federal bankruptcy laws govern the basic process and effects of bankruptcy as well as set up guidelines from which the states develop their regulations.

Means Test

To qualify for Chapter 7 bankruptcy, your income must fall below the median income for your state. Your income is calculated using your earning for the 6 months prior to filing minus deductions for certain expenses such as alimony, child support and mortgage payments.

Credit Counseling

Before you can file for Chapter 7 bankruptcy, you must complete credit counseling through an agency approved by your state.

Property Exemptions

Generally, states allow a fixed amount of exemptions for your car, primary residence and personal effects, such as clothing, furniture and food.

Exempted Payments

The states generally allow persons filing Chapter 7 bankruptcy to keep Social Security, disability, pension, child support and alimony payments.

Earned Wages

Most states allow you to keep either all or a large percentage of the wages you have earned but have not yet been paid to you.