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Chapter 7 Bankruptcy Filing Qualifications


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TERMINOLOGY

There is a "means" test that applies whenever anyone files for Chapter 7 bankruptcy. The state median income where you live determines the maximum amount of income you can have for a bankruptcy under Chapter 7. If your income exceeds the median, you may still be able to file under Chapter 7, if certain requirements are met. Contact your bankruptcy attorney to have them verify which type of bankruptcy to file.

Chapter 7 Bankruptcy Income Qualifications

Your income is the key to qualifying for a Chapter 7 bankruptcy. The average gross income you had over the past six months is compared to the state median income. If you are attempting to file a joint bankruptcy with your spouse, their income is included in the six month figure. The state median is determined by the latest inflation-adjusted Census Bureau figures for households with the same number of people you have in your home at the time of filing.

If your income is greater than the state median, there is still a possibility for you to file a Chapter 7 bankruptcy. Your disposable income for five years will have to meet the bankruptcy code requirement. Disposable income is calculated by subtracting your current expenses from your current income. The IRS determines what current expenses are allowed to be included in the disposable income calculation. Here are the bankruptcy code disposable income requirements for a Chapter 7 filing:

  • If your disposable income is less than $6,000 you qualify.
  • If your disposable income is between $6,000 and $10,000 and does not cover 25 percent of the amount of unsecured debt you currently owe, you qualify.
  • If your disposable income is between $6,000 and $10,000 and does cover 25 percent of the amount of unsecured debt you currently owe, you do not qualify.
  • If your disposable income is more than $10,000 you do not qualify.

Consult with your bankruptcy attorney to arrive at an accurate disposable income calculation. Make sure you have gathered the latest payment and balance statements from all of your creditors before you meet with your attorney.

Chapter 7 Bankruptcy Other Qualifications

In addition to the above income requirements, you must meet the following in order to be able to file for a Chapter 7 bankruptcy:

  • If you are late in filing any current or prior year’s tax returns, you must submit them before you are permitted to file for a Chapter 7 bankruptcy.
  • You must have met with a qualified credit counselor and have a certificate of proof within the past six months or you will not be permitted to file under Chapter 7.
  • If you attempted to file for a Chapter 7 bankruptcy in the past six months and the filing was dismissed because you did not comply with the bankruptcy court’s orders, you are not permitted to file under Chapter 7.