How to Qualify for Chapter 7
If you have been thinking about filing for bankruptcy protection as a way to obtain a fresh financial start, you may be wondering if you should file for Chapter 7 or Chapter 13 bankruptcy protection. Chapter 7 erases most debts, so you will not be required to pay your creditors after the bankruptcy petition is discharged. There are certain qualifications you must meet before you can file a Chapter 7 bankruptcy petition.
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Instructions
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Income Qualification
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Determine your gross income for the past six months, not including any benefits that you received under the Social Security Act. Include your spouse's income unless you and your spouse declare separate households and file separate tax returns. In most cases, you will qualify for Chapter 7 bankruptcy based on your income. If your income is equal to or below the median income for your state, you automatically qualify for this type of bankruptcy protection.
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Compare your income to the median income for residents of your state. Use the Census Bureau's figure for people who have the same number of household members as you. The Census Bureau provides inflation factors so you can adjust the median income amount in your state since the last census.
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If you have received unemployment income at any time during the past six months, consult with a qualified bankruptcy attorney in your state. Legal interpretations differ regarding whether unemployment income is a Social Security Act benefit and these interpretations may affect whether you qualify to file for Chapter 7 bankruptcy protection.
Means Test
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Calculate your disposable income for a period of 60 months. Disposable income is your present income minus allowable expenses. These expenses include necessary living, transportation and housing costs, as well as payments on some secured debts. If your income is above the state median, you may still qualify for Chapter 7. Bankruptcy law reform provides a means test to determine whether you could pay some portion of your debts. This means test overrides the state median income requirement if you meet the qualifications.
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Compare your disposable income against current bankruptcy law thresholds. If your disposable income is less than $6,000, you can file Chapter 7 bankruptcy. If it is greater than $10,000, you do not qualify for Chapter 7.
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Determine if you could pay at least 25 percent of your debt within the 60-month period. If not, and your disposable income is between $6,000 and $10,000, you still qualify for Chapter 7 bankruptcy protection.
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