Am I eligible for chapter 7 bankruptcy?
You can file chapter 7 bankruptcy only once every eight years. If you filed a chapter 13 in the past and want to file a chapter 7, the rules are a little more complicated. Call an attorney for more information.
Many people ask whether they are eligible for chapter 7. Assuming the debtor does not have a prior bankruptcy filing, the debtor’s eligibility to file a chapter 7 is based primarily on the bankruptcy means test. In 2005, Congress enacted the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCA). Many people rushed to file bankruptcy because it was assumed that with a GOP controlled congress, the rules would make it more difficult to qualify. This is partially true but for many a chapter 7 discharge is still in reach. In fact, the process for qualifying is much more straightforward. In the past, your eligibility to qualify was subject to a totality of the circumstances test. This meant that your eligibility rest in the hands of a judge. These days, the eligibility requirements are much more objective.
One of the most significant changes to the bankruptcy rules post BAPCA was the means test (B22A). Like it sounds, the means test is a measure of your financial means (ability) to service your debts or pay some of them back in a chapter 13 reorganization. The intent behind the test is to treat similarly situated debtors the same and to prevent some high income debtors from qualifying. In most cases, if you are below the median income for your household size and location, you should qualify but there are some rare exceptions which we won’t go into now. If you are above the median income, you may still qualify especially if you have a domestic support obligation or child care expenses. There are many factors that go into the analysis of whether an above median income debtor will qualify. A competent bankruptcy attorney will guide you through the process. If you are told that you do not qualify for a chapter 7, you may consider getting a second opinion. Some attorneys will put debtors into a chapter 13 because they can charge more legal fees than in a chapter 7.
Finally, whether you qualify for a chapter is not the final question. If you have significant debts that would not be discharged in a chapter 7, such as tax debts, a chapter 13 may be a better option. For more information about which debts cannot be discharged in a chapter 7, click here.