How to Best Qualify for Bankruptcy Chapter 7
The other names for Chapter 7 are straight bankruptcy or liquidation bankruptcy. Filling for this bankruptcy means ceding your assets and debts to bankruptcy court allowing the bankruptcy trustee to cancel all your debts or a part of them. It may also allow the trustee to liquidate some of your assets to settle the debt with your creditors. It is a huge relief to the debtors as it cancels the unsecured debts such as medical bills, credit cards and utility bills among others giving the debtor a fresh start. Chapter 7 is open for everyone to file for as long as they can satisfy some of the laid down conditions for its qualification. Below is a few ways which make you to best qualify for Chapter 7 bankruptcy.
You should not have received any other chapter 7 bankruptcy discharge in the last 8 years prior to the current filing. Fresh people to bankruptcy filing automatically satisfy this condition. Those who are filing for a second or subsequent bankruptcy must wait for 8 years from the date of discharging to file for chapter 7. If the eight years are not over and creditors are due, then you have to find help from another kind of bankruptcy as you are not eligible for this. Until the 8 years are over you should not file chapter 7. This requirement was set in order to stop people from misusing the liquidation bankruptcy every now and then. But if it is your first time to file or it has been over 8 years since your last discharge, then be happy. You have qualified the first condition.
For those who had in past been given a discharge on Chapter 13 bankruptcy. They will have to wait for 6 years to get chapter 7. If the 6 years are not over then you are not in luck. You are automatically disqualified from filing.
Another way to make sure you qualify for chapter 7 is by completing a credit counseling course from an approved agent. On completion of this course a certificate is awarded which you should produce in the court. This course should be done within six months prior to the filing for bankruptcy chapter 7. For this case make sure you take the course long before you think of filing to avoid last minute hassle.
The other way to qualify for chapter 7 is by passing the Means Test. This test is used to determine if you should be given a discharge or not. You are required to fill Form 2A or Form 2C. In Form 2A you fill your income and in Form 2C you fill your expenses. These are used to calculate your net income to determine whether you deserve the bankruptcy or not.
The test is designed to deduct some specific expenses you make monthly from the current monthly income you earn. The bankruptcy code defines current monthly income as the mean income the debtor earned over the last six calendar months prior to the filing for bankruptcy. This calculation gives the monthly disposal income you have. If this disposal income is high you chances of using chapter 7 are low and if the disposal income is low then chances of using chapter 7 are high. Disposal income and chance of using chapter 7 are inversely related. There is a limit which, if the disposable income exceeds, you are automatically disqualified from filing chapter 7. In other words; you fail the means test. This should be done by individuals who have their monthly income is equal or above the median income for households of the same size in the particular state the bankruptcy is being filed.
For individuals who have a monthly income below the median income of the state they are filing it, they automatically qualify to file for chapter 7. In other words they are not required to pass the mean test. If you are in this category of people then start filing immediately for as long as you qualify in the other conditions mentioned above.
Individuals with business debts are not required to take the means test as it is specifically made for people with consumer debts.