Not everyone can qualify for Chapter 7 bankruptcy, and the Chapter 7 process is not for everyone who can qualify. As such, before you begin your Chapter 7 proceedings, make sure to study up on the law — and alternative bankruptcy options that could be available to you.
If you do end up determining that your debt situation could benefit from the Chapter 7 process, you will need to qualify for the process. Here’s what will qualify you:
- Passing the bankruptcy means test: The means test looks at your monthly family income and the median family income for families in your state. If your family’s monthly income exceeds that of similarly sized family in your state, you will probably fail the Chapter 7 means test. The means test is required in cases where over half of your debt relates to consumer purchases.
- You’re are a married couple, an individual or the owner of a small business as a sole proprietor: Corporations and limited partnerships can’t file for normal Chapter 7. You’ll need to file for a business Chapter 7, which has different qualifications and standards.
- You didn’t recently receive a bankruptcy discharge: The law discourages “serial bankruptcy filers.” You can only file for Chapter 7 bankruptcy one time every eight years.
- You didn’t recently have a bankruptcy dismissed: Your last dismissal of a previous bankruptcy filing needs to have happened more than six months ago.
If you can satisfy the above four conditions, there’s a good chance that you can qualify for the Chapter 7 process. Qualifying, however, is not the end of the story. Next, you will need to navigate your bankruptcy proceedings in a way that saves you money and honors your legal rights.