With LegalFish, it's easy to net the right lawyer. First, choose an area of law below, then choose your specific issue.

Bankruptcy

Business Law

Criminal Law

Employment Law

Entertainment Law

Estate Planning

Family Law

Immigration

Intellectual Property

Personal Injury

Real Estate

Social Security

Tax Law

Workers Compensation

Other

Please select an area of Law

Eligibility Requirements for Chapter 7

If you are experiencing an extreme financial hardship, bankruptcy can potentially be a beneficial path for recovery. However, not everyone can file for bankruptcy. The government purposefully limits bankruptcies to people it determines are unable to pay their debts. In order to file, you have to pass certain conditions – called eligibility requirements. If you can pass the eligibility requirements for a Chapter 7, you can file a petition for bankruptcy and potentially have your debts discharged by the courts.

For a Chapter 7 Bankruptcy, there are several eligibility requirements you will need to meet in order to file your case. To begin with, you must legally qualify as an individual, partnership, or corporation. You also must have no previous bankruptcy filing within 180 days that was dismissed, whether voluntarily or involuntarily. All individuals must also receive and complete credit counseling from an approved agency within 180 days before filing a Chapter 7 bankruptcy petition. Finally, the most important component of Chapter 7 eligibility requirements is the means test.

What is the Means Test?

The means test is used by bankruptcy courts to determine eligibility based on a person’s income. Using the means test, the court assesses your income to determine if you have so little money that you should be unable to repay your debts. The means test asks two questions: “Is your income above the median income?” and “Do you have enough disposable income to pay your debts?” If your income falls below the median income for your state and household size, you automatically pass the test, without having to calculate your disposable income. If you income is above the median income, a formula will be used to calculate your disposable income. If your disposable income falls below the level determined by the court for your state and household size, you will pass the test and qualify for Chapter 7.

How Do I Know If I Pass The Means Test?

To determine if you pass the means test, the best action to take is to contact a bankruptcy lawyer. A bankruptcy lawyer will have access to the rules in your state that apply to your case. For some states, “means test calculators” have also been made available online.

What If I’m Not Eligible for Chapter 7 Bankruptcy?

If you are not eligible for Chapter 7, you still have options to consider. Many people who fail the means test are still able to file for Chapter 13 bankruptcy. In Chapter 13 bankruptcy, you will be required to consistently make payments for a set amount of time (usually 3 or 5 years), but at the end of that time your remaining debt can be discharged. In some cases, you can also pursue negotiation or a repayment plan separate from the court with the help of a bankruptcy lawyer.