Filing for Chapter 7 bankruptcy may discharge most of your debts and give you a fresh opportunity to reorganize your finances and regain financial freedom. However, not everyone qualifies for this type of bankruptcy.
To qualify for Chapter 7 bankruptcy, you must meet certain criteria, as discussed below.
Your income levels
If your income is too high, you may not qualify to file for Chapter 7. When determining whether your income level allows you to file for bankruptcy, you may be subject to the means test. It takes into account all your eligible monthly income and compares it to the state’s median income.
Should it be equal to or below, you can file for Chapter 7. Otherwise, you have to meet the other requirements:
Your ability to repay some debts
When your income exceeds the state’s median, attention will shift to the disposable income you have left after meeting some of your immediate needs like food and rent. If you still have money left over that can repay some of your unsecured debts, that might rule you out.
Dismissal of a former bankruptcy case within the past 180 days
If your previous Chapter 7 or Chapter 13 bankruptcy was dismissed over the past 180 days because you violated a court order, were fraudulent or upon your voluntary request by asking the court to lift the automatic stay, you are not qualified to file for Chapter 7.
What will happen if you are disqualified from filing for Chapter 7?
If you still have your sights set on filing for bankruptcy, it may be time to explore other alternatives, including Chapter 13. However, you first need to be aware of what you are getting yourself into and whether it will benefit or help you achieve your objectives.