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Monday, September 21, 2020

Who Qualifies for Chapter 7 Bankruptcy?

These are difficult economic times for many. With business closures due to COVID-19 and the resulting losses of available jobs, many people are finding it difficult to make ends meet. If you are going through financial struggles and finding it difficult to keep up with things such as minimum payments on your outstanding debt obligations, Chapter 7 bankruptcy may provide you with much-needed relief. At the end of a successful Chapter 7 bankruptcy process, an order of discharge is issued to the debtor which essentially reflects an elimination of dischargeable debts. Dischargeable debt, debt that can be eliminated, includes things such as credit card debt and health care bills. This can be a huge benefit to those grappling with how to pay off substantial amounts of debt. Not everyone, however, qualifies for Chapter 7 bankruptcy filing.

Who qualifies for Chapter 7 Bankruptcy?

The most significant requirement in qualifying for Chapter 7 bankruptcy is probably the “means test.” Chapter 7 exists for those who lack the amount of disposable income to make regular payments on outstanding debt obligations. In order to help ensure that only these individuals are able to take advantage of Chapter 7 bankruptcy benefits, the means test was established.

It must first be evaluated as to whether or not the debtor’s average monthly income falls above or below the median income of a similar household in the debtor’s state of residence. If the debtor’s household income for the six months prior to filing bankruptcy is less than the average gross income of a household of comparable size in the same state where the debtor lives, then the debtor satisfies this requirement for Chapter 7 bankruptcy. If the debtor’s income falls above the average gross income of a household of comparable size in the same state, then there may still be a chance that the debtor will be able to file Chapter 7 bankruptcy, but another part of the means test must be employed.

It must be calculated that the debtor’s disposable income falls low enough that he or she qualifies for Chapter 7 bankruptcy. This requires a kind of balancing test where your qualifying monthly expenses are compared to your monthly income. Only certain expenses are recognized in this calculation. If, after deducting qualifying monthly expenses from your monthly income, it is found that your disposable income, what is left after the deductions are taken, is low enough, then you meet the means test requirement for filing Chapter 7 bankruptcy.

There are also restrictions on filing for Chapter 7 bankruptcy if you have filed for bankruptcy in the past. If you previously filed Chapter 7 bankruptcy and received a discharge, then you must wait at least 8 years from the filing date of the prior bankruptcy before you file Chapter 7 bankruptcy again. If you previously filed for Chapter 13 bankruptcy and received a discharge, then you must wait at least 6 years from the date of the Chapter 13 bankruptcy filing before you can file for Chapter 7 bankruptcy.

New Jersey Bankruptcy Attorneys

Know your options. Bankruptcy can be a lifeline for those in the midst of financial struggles. Talk to the trusted bankruptcy attorneys at The Cassidy Law Firm to see what we can do for you. Contact us today.

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