Chapter 7 bankruptcy is available for both businesses and individuals. When individuals or married couples pursue relief through Chapter 7 bankruptcy, they must first prove that they qualify.
Chapter 7 bankruptcy, also known as liquidation bankruptcy, is a relatively fast process. Filers can receive a discharge within a matter of months in many cases. While asset liquidation is sometimes required to be eligible for a discharge, exemptions allow many people to complete a Chapter 7 bankruptcy without selling or refinancing any of their assets.
Proving eligibility for a Chapter 7 bankruptcy is the first step toward lasting financial relief. What are the requirements for a Chapter 7 bankruptcy?
Filers must have below-average income
The main consideration when evaluating an individual’s eligibility for Chapter 7 bankruptcy is how their household finances compare to same-size households across the state. People hoping to file for Chapter 7 bankruptcy must pass a means test.
They look at their income over the last six months to estimate their annual income. They can make certain adjustments to that figure for certain common household expenses. They then compare their adjusted household income to the current state median, as established by the Department of Justice.
The total income that a person or couple can have while still qualifying depends in part on the number of dependents within the family. Some people rush through the means testing process or jump to the conclusion that they cannot qualify for Chapter 7 bankruptcy.
Reviewing household finances with an experienced bankruptcy lawyer can help people determine if Chapter 7 proceedings might be an option for them. For those who qualify, Chapter 7 bankruptcy is one of the fastest and most effective solutions for overwhelming unsecured debts.
