Are you Eligible to file for Chapter 7 Bankruptcy?

By Madeleine Brooks

What is Chapter 7 Bankruptcy? For individual persons, Chapter 7 Bankruptcy allows you to liquidate your assets. For a business, Chapter 7 is when the business is heavily in debt and cannot pay off its creditors. As a result, the business must liquidate its assets and dissolve the operations of the business. Chapter 7 Bankruptcy is the most common filing in the United States.

There are eligibility rules for individuals filing for bankruptcy. The test measures your “current monthly income” against a median income for a family of the same size in your state. The current monthly income is an average of the income you bring in over the last six months. If your current monthly income is less than or equal to the median income, you are eligible to file for Chapter 7 bankruptcy.

If your current monthly income is more than the median income, you must pass the “means test”. The objective of a “means test” is to determine if you have enough disposable income after deducting allowed expenses and required debt payments. This is for you to be able to repay a part of your debts over a five-year time frame. Click this link and you will be able to use a “means test calculator” to see if you are qualified to file for Chapter 7.

Sources:

"Chapter 7, Title 11, United States Code." Wikipedia. 19 Jan. 2009. 24 Jan. 2009 .

"Nolo's Bankruptcy Means Test Calculator." Nolo. 24 Jan. 2009.

"Who Can File for Chapter 7 Bankruptcy?" Nolo. 24 Jan. 2009.