The bankruptcy process is designed to be a protection for consumers. However, due to the complex, legal nature of the process there are some strict rules and requirements to note for anyone considering filing. Many of these restrictions have very little effect on the common consumer, but understanding some of the basics can better protect your interests when seeking debt relief in bankruptcy.
One of the first limitations that is faced in the bankruptcy process is the means test. This test is used to determine your eligibility to qualify for a Chapter 7 bankruptcy. The means test formula evaluates your income against the median income level of your state of residence. If your income is less than the median income level of the state, you pass the means test and are eligible to file for a Chapter 7. If your income is greater than the median income level of the state, you will fail the means test and ineligible for a Chapter 7. However, if your total debt owed and household size qualify, it may be determined by the court that your disposable income is sufficient for debt repayment in a Chapter 13 repayment plan.
Another limitation that could influence ability to obtain a discharge of your debts is the type of debt you carry. Not all debts are eligible for bankruptcy, and will not be able to be resolved through bankruptcy. For example, student loan debts, some tax debts, back-due domestic support payments, and criminal restitution payments are generally not eligible for bankruptcy. More common debts, such as medical bills, credit card debt, a car or mortgage loan debt, can be resolved in bankruptcy.
The last limitation in bankruptcy to consider before filing is the rule for how often a bankruptcy can be filed. The rules for filing bankruptcy multiple times are pretty clear. If your debts were discharged in a prior Chapter 7 case, you must wait 8 years to file for another Chapter 7, or 4 years to file for Chapter 13. If your debts were discharged in a prior Chapter 13 case you must wait 6 years to file for Chapter 7, or 2 years to file for another Chapter 13 case.
Contact our Fort Worth bankruptcy law office for more information about bankruptcy or to discuss how we can help you resolve your debts.