Can You File Chapter Seven Bankruptcy?
The first question clients usually ask is if they are eligible to file a chapter 7 bankruptcy. The new bankruptcy laws have modified who is eligible to file personal bankruptcy to prevent people from taking advantage of the system. Wondering if you qualify for ch 7?
Individual - In order to file ch 7, you have to be an individual, businesses are not eligible. You can be single or married. If you are married you may file with or without your spouse. If you are married and filing alone you will have to include your spouse’s income to be considered for your eligibility to file.
Income - Chapter 7 filers must complete a means test that takes your income and expenses into account to determine if you are able to pay a portion of your debt. You are eligible for a chapter 7 if your income is under the state median for a family of your size.
You can provide your living expenses to qualify if your income is above the median. Your living expenses will then be equated to standard allowances the IRS has set for housing, groceries and other normal expenses. If you have other expenses that are needed to live such as special medical needs, these can also be included to lower your disposable income.
You can file ch 7 if you have less than $6000 in disposable income, but if you have over $10,000 you cannot file and may be forced into a chapter 13 if you try. If your income is inbetween those limits and you can’t afford to pay at least 25% of your total unsecured debt, then you can file chapter 7, but if you can afford to pay it, then you do not qualify. The new means test can be complicated if you make more than the median income, so it’s important to consult a bankruptcy attorney.
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