ARE YOU ELIGIBLE TO FILE BANKRUPTCY?
In typical circumstances, any person that resides, has business, or property in the United States may file bankruptcy. The critical issue is whether that person can file a Chapter 7 or a Chapter 13 bankruptcy.
If you have received a discharge of your debts in a previous Chapter 7 bankruptcy, you are not eligible to receive another Discharge in a new Chapter 7 bankruptcy unless 8 years have passed since the date of filing the first Chapter 7 bankruptcy. If you received a Discharge in a Chapter 7 bankruptcy and wish to obtain a Chapter 13 discharge in bankruptcy, 4 years must elapse from the date of filing your prior Chapter 7. If you have received a Discharge under a Chapter 13 bankruptcy and wish to file a Chapter 7 bankruptcy, 6 years must pass from the date of filing your prior Chapter 13 bankruptcy in order to receive a Chapter 7 Discharge. Finally, if you filed a previous Chapter 13 and received a Discharge in that case, you can re-file a new Chapter 13 bankruptcy 2 years after the date of filing the case.
Chapter 7 is a debt liquidation whereas a Chapter 13 is a reorganization plan where a debtor would pay to a Chapter 13 Trustee a sum of money each month for a certain length of time. In a Chapter 13, once those payments have been made over that term, the balance of any remaining debts that can be discharged are discharged. In either chapter of bankruptcy, some particular debts are not discharged under the law. An experienced bankruptcy lawyer can explain those types of non-dischargeable debts.
In normal circumstances, the basic determination on whether someone can file a Chapter 7 or Chapter 13 bankruptcy is based upon their income. Debtors now have to go through the Means Test under the U.S. Bankruptcy Code. The Means Test is basically a type of income test. What the Bankruptcy Court will do is look at the last six months of income for the entire household and multiply that amount times two so it equates to a yearly income. Then they compare your income to the median income for the same size household in the particular state in which you reside. If your household income is below the applicable median household income for your particular state, it is then presumed you can file a Chapter 7 bankruptcy (so long as you satisfy any additional requirements that may apply under the Bankruptcy Code). If your income is above the applicable median income for your state, you proceed to a further portion of this test where you deduct from your gross income certain deductions for living, housing, taxes and other allowable expenses which can be taken under the Means Test. At the end of this calculation, if there is any disposable income that remains, the presumption is that you can at least pay that amount per month toward a Chapter 13 Plan to your unsecured creditors. If after the end of the Means Test there is no disposable income remaining, then you also may be able to file for a Chapter 7 bankruptcy.
Please contact your local bankruptcy attorney to discuss whether you qualify to file a Chapter 7 or Chapter 13 bankruptcy. At that time, you can also discuss the other applicable rules under bankruptcy code to see whether they may affect your ability to file.
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