Chapter 7 bankruptcy is tremendously helpful when people are struggling under a mountain of debt that they can't ever hope to pay off. However, not everyone can qualify for Chapter 7 proceedings.
If you're not sure if you qualify for Chapter 7 bankruptcy, you might want to review the following common disqualifiers for the process:
1. The filer makes too much money
Bankruptcy filers must pass the "bankruptcy means test" to qualify for Chapter 7. Part of this test involves checking your income during the last six months and comparing it to the state's median income. If your median income equals or falls below the median income in your state, then you have passed the first part of the bankruptcy means test. If it exceeds the state median, then you need to apply for a different type of bankruptcy.
For example, if you have an average income that exceeds the state's median income, you might have enough disposable income (after subtracting allowed expenses) to complete a Chapter 13 repayment plan.
2. It hasn't been long enough since the last bankruptcy
If you have completed a Chapter 7 bankruptcy inside the last eight years or a Chapter 13 bankruptcy inside the last six years, then you're not eligible to file for Chapter 7. If you file for Chapter 7 anyway, the court will dismiss your application.
3. A court dismissed the filer's bankruptcy within the last 180 days
Following a bankruptcy dismissal, you might be subject to a 180-day waiting period before filing again. This pause on filing applies to dismissals for the following reasons:
- Court order violations
- Fraudulent bankruptcy filings or actions that were an abuse on the court
- The filer asked for a dismissal when a creditor requested that the court remove the automatic stay
Do you want to file for Chapter 7 bankruptcy?
Chapter 7 bankruptcy proceedings may not be appropriate for everyone, but when you meet the requirements, you can reap the rewards of dissolving your toxic debt and restarting your life financially. Learn more about bankruptcy to see if this debt resolution process can benefit you and your family.