Before you begin seriously considering Chapter 7 bankruptcy, you may want to be aware of the requirements. A little over a decade ago, a bankruptcy judge had to determine whether you qualified for bankruptcy. This judge had quite a lot of leeway in their decision, and so the decision mostly rested on them. Today, there are some requirements that debtors need to meet before they are considered.
You Have the Money to Pay Off Your Debts
It may go without saying, but the courts will look at your assets and determine whether you have enough to simply pay off all of your debts. If you can pay off all of your debts without declaring bankruptcy, then the courts will likely deny your filing.
Bankruptcy is intended to pay off the debts that can be paid off and then discharge all the debts that cannot be paid. Thus, it's really only intended for those who have absolutely no chance of paying off their debts in the foreseeable future. The more substantial your disposable income is, the less likely you are to be allowed a Chapter 7 bankruptcy ruling.
Likewise, if you have the income to pay off your debts and have simply ended up in over your head, the bankruptcy courts are not likely to allow you to declare Chapter 7 bankruptcy. This is because, given time, you should be able to resolve the situation successfully and start paying off your debts again.
However, you may still be able to declare Chapter 13 bankruptcy, if it appears as though you may be able to pay off your debts but need to restructure them.
If your income level is below the median income for a standard household in your state and of your household's size, you may be allowed to declare Chapter 7 bankruptcy without further investigating your assets.
You Have Recently Declared Bankruptcy
You can be denied bankruptcy if you declared Chapter 7 bankruptcy within the past eight years or you declared Chapter 13 bankruptcy within the past six years. However, if you declared bankruptcy 10 years ago, there is nothing stopping you from declaring bankruptcy again.
The time that you declared bankruptcy is considered to be the time that you last filed for bankruptcy, rather than when the bankruptcy was completed.
You may also be unable to declare bankruptcy if you attempted to declare bankruptcy within the last 180 days and were denied, though the denial will need to be related to the violation of a court order, a fraudulent filing, or you personally requesting the dismissal.
You Are Considered to be "Defrauding" Your Creditors
You may be rendered ineligible for bankruptcy if it appears as though you have done something to hide assets from your creditors. Common scenarios include trying to gift money to family and friends or destroying or "losing" valuable possessions. These acts, when taken just before bankruptcy, are often considered to be intentional attempts to hide money from the bankruptcy process.
You Need to Go Through Credit Counseling
Finally, before you're eligible for Chapter 7 bankruptcy, you need to go through the process of credit counseling. Credit counseling gives you information about what other options are available to you rather than bankruptcy. This is a chance to figure out other alternatives, such as debt management programs. In many cases, however, bankruptcy is still the best solution and you can continue the bankruptcy process.
Are you not sure whether you would qualify for Chapter 7 bankruptcy? The best way to find out is to ask. By contacting a professional, you can be sure to get exactly the information you need to begin repairing your financial and credit situation. To find out whether you qualify, contact C. Taylor Crockett, P.C.