Do you qualify for bankruptcy? There are a lot of things to consider, and we try to break it down for you. At Upsolve, we provide free Chapter 7 bankruptcy services for those in need of a fresh start.
Written by Kristin Turner, Harvard Law Grad.
Updated August 7, 2020
Do I qualify for bankruptcy? That is a question many Americans ask themselves each day. If you are struggling with debts you cannot pay, you may qualify to file for debt relief under Chapter 7 of the Bankruptcy Code.
If you are ready to find out the answer to the question “Do I qualify for bankruptcy,” we encourage you to begin our free process to determine if you can get rid of your debt by filing a Chapter 7 bankruptcy case.
What is a Chapter 7 Bankruptcy Case?
Before you begin the process to determine if you can file a Chapter 7 bankruptcy case, it helps to understand what a Chapter 7 case involves. A Chapter 7 bankruptcy case allows a debtor to get rid of most, if not all, the debtor’s unsecured debts. In most cases, the debtor gets rid of all debt while keeping all property.
A Chapter 7 bankruptcy filing can eliminate debts including:
Credit card debt
Unpaid rent or lease payments
Some personal income taxes
Old utility bills
Some debts are non-dischargeable in bankruptcy, including alimony, child support, and student loans.
Secured debts must be paid if you want to keep the property you used as collateral to obtain the loan. However, you can get rid of secured debt in Chapter 7 by surrendering the property.
By surrendering secured collateral through a Chapter 7 case, you get rid of the debt without worrying about owing the creditor a deficiency judgment if the sales proceeds from the property do not pay the loan in full.
Filing a Chapter 7 bankruptcy case helps you get out of financial trouble when you find yourself hopelessly struggling to pay debts you cannot afford to pay. A Chapter 7 bankruptcy discharge gives you the freedom you need from financial problems so that you can focus on a better future for you and your family.
Who Can File for Bankruptcy Relief? Do I Qualify for Bankruptcy?
Individuals, couples, and businesses can qualify to file for bankruptcy relief. However, not everyone qualifies to file for debt relief under Chapter 7. Individual debtors must meet certain requirements to obtain a bankruptcy discharge in Chapter 7.
Businesses usually always qualify to file a Chapter 7 bankruptcy petition if the business wants to cease operating. However, individuals must meet several requirements if they want to discharge debts in a Chapter 7 bankruptcy.
Do I Qualify for Bankruptcy Under Chapter 7 If I Already Filed a Bankruptcy Case?
If you have filed a prior bankruptcy case, you must determine if you qualify to receive another bankruptcy discharge. While it is possible to file back-to-back bankruptcy cases, you are limited to the number of bankruptcy discharges you may receive during a specific period.
Do I qualify for bankruptcy under Chapter 7 if I filed a previous Chapter 7 case?
You may receive another bankruptcy discharge under Chapter 7 if you wait at least eight years before filing another Chapter 7 bankruptcy petition.
Do I qualify for bankruptcy under Chapter 7 if I filed a previous Chapter 13 case?
You may receive another bankruptcy discharge under Chapter 7 by waiting at least six years before filing for bankruptcy relief after a prior Chapter 13 case.
Do I qualify for bankruptcy under Chapter 13 if I filed a previous Chapter 7 case?
Sometimes, people need bankruptcy help sooner than six to eight years after filing a previous bankruptcy case. If you filed a Chapter 7 case and you need debt relief sooner than eight years, you might explore filing for debt relief under Chapter 13. The waiting time between a Chapter 7 bankruptcy case and a Chapter 13 case is only four years.
If you need a fresh start, take our screener to start Upsolve’s free bankruptcy process. You do not need to wonder anymore if the answer to “Do I qualify for bankruptcy” is yes or no.
Do I Qualify for Bankruptcy if I Have a Job?
Another qualification for receiving a bankruptcy discharge under Chapter 7 is an income requirement. If you are asking “Do I qualify for bankruptcy even if I have a job,” the answer is maybe.
Chapter 7 is typically reserved for individuals who have a “negative” income each month because they do not have the money to pay bills. Some people qualify for Chapter 7 even if they have some disposable income after paying necessary living expenses each month.
Before you file a Chapter 7 bankruptcy petition, you need to complete a Means Test. The Means Test is a bankruptcy form used to determine the answer to the question, “Do I qualify for bankruptcy under Chapter 7.”
Do I Qualify for Bankruptcy if I Have Low Income?
The Chapter 7 Means Test compares your average monthly income to the median income of other households in your area. You need income information for the past six months to complete the Means Test. The form calculates your average income based on the past six months to arrive at an average annual income.
Your average annual income is compared to the median annual income of a household of your size in your area. If your income is below the average income level, you meet the income qualification to file Chapter 7.
Do I Qualify for Bankruptcy if I Have Low Income?
If your average annual income exceeds the median income level established for a household in your area, you must complete the second section of the Mean Test to answer your question, “Do I qualify for bankruptcy under Chapter 7.”
The second section of the Means Test allows you to deduct certain living expenses from your gross income. Once you deduct all allowable expenses, you may qualify to file under Chapter 7 if your disposable income is below the allowable limit to file under this chapter.
If your income exceeds the maximum amount of disposable income in Chapter 7, you may want to consider filing for debt relief under Chapter 13.
In some cases, a person may qualify for Chapter 7 with disposable income, such as in the case of business debts. However, there are few exceptions to the disposable income level for Chapter 7 cases.
Do I Qualify for Bankruptcy Under Chapter 7 if I Own Assets?
Another issue many people worry about is whether they might lose their home, car, or other property if they file bankruptcy. The potential for losing property is one of the reasons people do not even bother asking “Do I qualify for bankruptcy.”
The good news is that most Chapter 7 debts keep all their property while getting rid of debt. By using bankruptcy exemptions, you can protect your property from the court and your creditors. Start the Upsolve bankruptcy process to determine if you qualify for a no-asset Chapter 7 bankruptcy case.
Do I Qualify for Bankruptcy to Get Out of Debt?
Many people ask this question each day because they are struggling to keep their heads above water. It is extremely easy to get upside-down when you face financial hardships. Losing your job, becoming ill or injured, going through a divorce, or losing your spouse can cause you to experience financial trouble.
Upsolve is a non-profit organization. We assist individuals and couples who need to seek bankruptcy relief, but they cannot afford to hire an attorney to help them. We want to help you get a fresh start, so you can move past a financial crisis. We do not charge for our services. You can watch videos of past users who have found debt relief without hiring a bankruptcy attorney.
Bankruptcy attorneys provide a valuable service to the public. However, some people cannot afford to pay an attorney for help. You can join the millions of people who have gotten a second chance with bankruptcy even though you may not be able to afford to pay a bankruptcy attorney.