Do You Qualify for Chapter 7 and 13 Bankruptcy

You may have run into some financial hard times and owe a lot of money to a lot of different creditors. However, you may not have the means to pay those bills on time. You may have heard of Chapter 7 and 13 Bankruptcy as a solution for people in your situation, but you may be wondering, “Do I qualify?”.

First of all, you should know that that Chapter 7 and 13 Bankruptcy are quite different from each other. Chapter 7 Bankruptcy is more or less liquidation. In a Chapter 7 Bankruptcy, a trustee will be appointed that will take over the control of the debtor’s assets. The trustee will sell these assets and use the proceeds to reimburse the creditors who are owed money by the debtor. Fortunately for individuals, in most states there are extensive exceptions from certain kinds of property being considered assets that can be liquidated. Often times, this results in individuals being able to keep their property and have their debts discharged.

One the other hand is Chapter 13 Bankruptcy. Under Chapter 13, debts will be reorganized in a manner in which a debtor will be able to repay them in a period no longer than five years. Chapter 13 is much slower than the Chapter 7 process and more expensive for debtors since they will have to slowly pay back their debts.

Comparing Chapter 7 and 13 Bankruptcy, it may seem like Chapter 7 is the better deal. However, this may still leave you asking the question of, “Do I qualify?” You may also be wondering, “Do I qualify for Chapter 7 or Chapter 13?”.

The first qualification you must meet is not having had a Chapter 7 bankruptcy in the past eight years or a Chapter 13 bankruptcy in the past six years that paid less than seventy percent of your debts owed to unsecured creditors.

Due to a law passed in 2005, you must now also pass a “means test” to determine whether you quality for Chapter 7 or Chapter 13. This means test was introduced as a way to prevent people who have disposable income from gaming the bankruptcy system.

When you take this means test, your income over the previous six months will be examined. Your income will then have to be contrasted against a “median income.” This median income will be determined by taking the median from different household incomes of households of the same size in your jurisdiction. If your income is equal to or less than this median income, you can file for Chapter 7 bankruptcy. If it is greater than this median income, you will have to file for Chapter 13.

However, there are still many ways to sway a judge into allowing you to qualify for a Chapter 7 bankruptcy instead. You should consult a lawyer specializing in bankruptcy to help you determine the best path to freeing yourself of suffocating debt whether it is through Chapter 7 or Chapter 13 Bankruptcy.