Can I File Chapter 7 Bankruptcy?
Chapter 7 bankruptcy is designed to quickly and effectively eliminate unsecured debt for people who really need help. This court process typically takes just a few months to complete.
This type of bankruptcy is generally a good fit for people who:
- Have little regular income
- Have unsecured debt relating to credit cards, medical bills, or personal loans
- Have few valuable possessions not protected by state exemption laws
In order to file, you’ll first need to pass the means test, which is measure of your disposable income and your ability to repay debts. The means test is designed to reserve Chapter 7 only for those who truly need its powerful protections.
Ask a Chapter 7 bankruptcy lawyer whether you qualify to file, and if Chapter 7 is a good fit for you. Receive a free case evaluation with a Chapter 7 attorney near you by simply completing the free case review form on this page right away.
Who can Chapter 7 Bankruptcy Help?
Most people who file for Chapter 7 bankruptcy have mostly unsecured debts. This includes debt from:
- Credit cards
- Medical bills
- Utility bills
- Personal loans
- Payday loans
If you qualify, all of your debts relating to these may be completely wiped out in just a few months.
People who have outstanding debt on big-ticket items like homes and cars and want to keep that property usually opt to file for Chapter 13 bankruptcy, which allows for repayment of debts over a 3-5 year period and typically allows the debtor to keep his property.
Also, in order to file you must meet the requirements set by the bankruptcy means test.
Chapter 7 Requirements
The new bankruptcy law that took effect in October of 2005 contains provisions that may prevent people from taking advantage of Chapter 7’s powerful debt reduction abilities.
The law now makes anyone who wants to file Chapter 7 bankruptcy take the Chapter 7 means test as a way of demonstrating true need.
The means test is not designed to keep you from getting debt relief. Generally speaking, if you earn at or less than the median annual income in your state, you should qualify for Chapter 7 bankruptcy.
Chapter 7 Means Test Details
The first step of the means test is to compare the debtor’s income to the state median income where he resides.
The test ends right there for most Chapter 7 debtors—if the debtor’s income is below the median for his state, he can file under Chapter 7.
However, if a debtor’s income is higher than his state’s median, it doesn’t necessarily mean that he can’t file under Chapter 7: it just means that the debtor must move on to the next step of the means test and provide additional information to determine how much disposable income he has available to pay debts.
The short answer is that it is likely nearly everyone who would have filed for Chapter 7 bankruptcy before the law change can still do so.
Talk to a Chapter 7 Bankruptcy Lawyer for More Information
For specific information about your eligibility for Chapter 7 bankruptcy and to find out whether filing bankruptcy would provide the relief and protection you need, connect with a bankruptcy attorney today.
The above summary is not legal advice. Chapter 7 Bankruptcy Laws may have changed since our last update. For the latest information on bankruptcy laws, speak to a local bankruptcy lawyer in your state.