Most people who have a permanent address or business, or own property in the United States are eligible to file for bankruptcy. However, there are some exceptions and meet specific guidelines in order to be eligible to have your debt discharged. Here’s how to know if you’re eligible to file.
Chapter 7 vs Chapter 13 Bankruptcy
In a Chapter 7 bankruptcy, your non-exempt property is sold, and the proceeds are used to repay a portion of your debt. When a Chapter 13 bankruptcy is filed, you keep your property and repay your debtors according to a repayment plan lasting three to five years. The eligibility requirements for each type of bankruptcy are based on how much money you make and how much disposable income you have.
Income Too High
You must fall within certain income requirements to be eligible to file. The court determines your eligibility by comparing how much money you make each month against the average income of similar families within your state. If your income is average or below average, you are eligible for Chapter 7.
If your income is too high, you will need to pass a means test to qualify for Chapter 7. The means test is used to determine how much disposable income you have. Disposable income is the amount of money you have leftover from your paycheck after your bills and debt payments are made. If your income is too high, you will be required to file for Chapter 13 and repay your debts according to a repayment plan that usually lasts three to five years.
Too Close to Previous Bankruptcy
Individuals who have received a Chapter 7 discharge within the last eight years or have received a Chapter 13 judgment within the past six years are not eligible for another discharge until the required time has passed.
You’ve Had a Bankruptcy Case Dismissed
You are not eligible to file for bankruptcy if a previous bankruptcy case was dismissed within the last 180 days for any of these reasons:
- You asked for your case to be dismissed after one of your creditors petitioned the court for relief from the automatic stay.
- The court dismissed your case because you abused the system in some way.
- The court dismissed your case because you committed fraud, such as lying on your paperwork.
When you file your bankruptcy paperwork, you will be required to swear that everything you reported is true. If you intentionally provide false information or conceal assets, your case will be dismissed, and you will be charged with perjury or fraud.
Most people are eligible to file for either Chapter 7 or Chapter 13, as long as they are truthful with the court. If you need help filling out your forms and filing your case, contact a bankruptcy attorney for help. It could save both time and money in the long run.