Simple Check to Test Your Eligibility for Filling Chapter 7 Bankruptcy

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Simple Guide to Determine Your Eligibility for Chapter 7 Bankruptcy


Overview

Many individuals prefer Chapter 7 bankruptcy over Chapter 13 due to its speed, effectiveness, and simplicity, as it doesn’t require long-term payments. But how do you know if you're eligible? This guide will help you find out.

Understanding Chapter 7 vs. Chapter 13

Chapter 7 bankruptcy is a quick process, often taking only 4 to 6 months to complete. Typically, it involves just one court visit to resolve debts. However, not everyone qualifies for Chapter 7. If your income supports a Chapter 13 repayment plan, you may not be eligible for Chapter 7.

Eligibility Criteria for Chapter 7

1. Income Comparison:
- Calculate your average income for the past six months.
- Compare this to the median income for a family of your size in your state. Median income data is available at [www.usdoj.gov/ust](http://www.usdoj.gov/ust).

2. Means Test:
- If your income exceeds the state median, you'll undergo a "Means Test."
- Determine your disposable income by:
- Calculating average monthly income.
- Subtracting allowable expenses (set by the IRS, including clothing, transportation, and food).
- Deducting monthly payments for secured debts (like mortgages or car loans) and priority debts (such as child support, alimony, and taxes).

3. Means Test Outcomes:
- If disposable income is less than $100, you qualify for Chapter 7.
- If disposable income is over $166.66, Chapter 13 is required unless exceptional circumstances are proven.
- If disposable income falls between $100 and $166.66, determine if it covers more than 25% of unsecured debts (credit cards, student loans, medical bills). If not, Chapter 7 is still an option.

Conclusion

Choosing Chapter 7 can be advantageous as it doesn't require debt repayment like Chapter 13. However, it's crucial to verify eligibility based on the criteria outlined above to pursue this path effectively.

You can find the original non-AI version of this article here: Simple Check to Test Your Eligibility for Filling Chapter 7 Bankruptcy.

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