When your debt begins to quickly outpace your income and your debtors start to call and demand payments you cannot make, then filing for bankruptcy may help you begin again. The United States Courts website reports that individuals may file for Chapter 7 bankruptcy; however, they must discover whether they are eligible first.
Because determining eligibility is an important primary step in declaring Chapter 7 bankruptcy, which involves the liquidation of your assets to pay off your debtors, understanding the requirements first can help you understand whether you qualify and what other options you may have if you do not meet them.
The means test
A means test measures whether an individual or joint filing meets a state’s required median amount. When this is the case, you must pass through the means testing process before you can continue to file Chapter 7. Primarily, the means test exists to protect the bankruptcy process from abuse and wasted time for the courts. While each state has its own laws concerning means, the type of type you wish to discharge and the amount may both affect your eligibility.
While each Chapter 7 bankruptcy case differs in personal circumstances, the court may dismiss your request depending on the type of debt you owe. For example, certain types of consumer debt may not qualify under this type of bankruptcy, including:
- Credit card debt
- Student loans
- Payday loans
While these debts do not automatically disqualify you from declaring Chapter 7 bankruptcy, individual consumer debt may not meet the standards as business debt might.
You may want to remember that filing Chapter 7 includes a variety of non-refundable fees related to filing and trustee costs. If you have trouble meeting these, the courts may allow you to pay them in installments.