How Do I Qualify for Bankruptcy?

Bankruptcy may be your only solution to growing debt.

If you've recently lost your job or are having a hard time paying back debts, filing for bankruptcy may be an option. Bankruptcy is a federal process that helps you either eliminate your debt or create a reasonable repayment plan. You can file for two types of bankruptcy: Chapter 7 and Chapter 13. Filing Chapter 7 bankruptcy asks the federal court to wipe all of your debts. Filing for Chapter 13 asks for a repayment plan. Chapter 13 often wipes out some, but not all, debt.

Difficulty:

Moderate

Instructions

Qualifying for Chapter 7 Bankruptcy

1. Participate in a federally approved credit counseling program. You must complete this class within 6 months before you file for either Chapter 7 or Chapter 13 bankruptcy.

2. Compare your monthly income to the median income of your state. If your monthly income is less than your state's median income level, you qualify for Chapter 7. If not, proceed to step 3. See "Resources" for a link to the federal government census site to compare your income.

3. Calculate your net income. Subtract your monthly expenses from your current monthly income. Multiply this number by 60.

4. Compare your net income to the Chapter 7 standards. If your net income is less than $9,999 and is not more than 25 percent of your debt, you qualify for Chapter 7 (as of 2010).

Qualifying for Chapter 13 Bankruptcy

1. Participate in a federally approved credit counseling program. You must complete this class within 6 months before you file for either Chapter 7 or Chapter 13 bankruptcy.

2. Compare your monthly income to the median income of your state. Your monthly income must be higher than median income level of your state to qualify for Chapter 13. See "Resources" for a link to the federal government census site to compare your income.

3. Calculate your net income. Subtract your monthly expenses from your current monthly income. Multiply this number by 60.

4. Compare your net income to the Chapter 13 standards. If your net income exceeds $9,999, you can file for Chapter 13. If your net income doesn't exceed $9,999, but your net income is greater than 25 percent of your debt, you can also qualify for Chapter 13 bankruptcy.

References

• Mortgage Fit: Check Whether your Qualify for Bankruptcy Chapter 7 or 13
• U.S. Courts: Liquidation Under the Bankruptcy Code
• NOLO: Bankruptcy FAQ (Chapter 7 and Chapter 13)

Resources

• Read this Article in Spanish
• U.S. Census Bureau: State Median Income