A Chapter 7 bankruptcy can offer those struggling with severe debt burdens a fresh start by eliminating debts within a matter of months. Often referred to as a “straight bankruptcy” the court can grant a release of liability from some types of debt after any non-exempt assets are liquidated to satisfy a portion of the debt owed. Although a quick elimination of debt is an appealing option, not everyone will qualify for a Chapter 7 bankruptcy.
The U.S. Bankruptcy Code has specific guidelines for debtors seeking help under Chapter 7. In order to obtain a debt discharge under Chapter 7, you must meet the following requirements:
Means test- The means test evaluates your eligibility by comparing your income, total debt amount owed and size of family against this predetermined criteria, the means test essentially gives an answer as to whether you have the “means” to repay your debts in full or not.
Income criteria- Your income is compared the median income of your state as part of the means test. If your income is less than the median income level of your state, you may qualify for Chapter 7. If your income is more than the median income level of your state, you may still be eligible for Chapter 7 if your debt amount and family size passes the means test. Otherwise, you will qualify for a Chapter 13 instead.
Prior filings- You may be eligible to file for a Chapter 7 if you have not filed a prior Chapter 13 bankruptcy in the previous 6 years, or filed a prior Chapter 7 bankruptcy in the previous 8 years.
Credit counseling- In order to be eligible for a Chapter 7 bankruptcy, assuming you have passed all other eligibility requirements, you will be required to complete a debtor’s education course through a credit counseling agency.
Contact a Dallas bankruptcy lawyer to go over your financial details to determine your eligibility for a Chapter 7 bankruptcy.