The decision for fil for bankruptcy is often a complex one. Along with deciding whether it is the right option for you, you will also need to determine whether you are considered eligible for a chapter 7 filing. The following are a few eligibility factors to keep in mind if you are mulling over your debt relief options.
Means testing is applicable when a chapter 7 filer’s current monthly income is greater than the state median. The means test is used to ensure a person is not abusing the chapter 7 system. In this case, a filing may be considered abusive if a review of aggregate monthly income over the previous five years before the filing was more than $12,850 or 25% of the filer’s non-priority unsecured debt, which includes things like credit card debt and student loans.
Prior bankruptcy filings
In the 180 days prior to filing, a person must not have had a bankruptcy petition dismissed for failure to appear in court. Dismissal based on failure to comply with court orders or a voluntary dismissal by the filer in an attempt to prevent creditors from taking property to recoup debt must also not have occurred in the previous 180 day period.
All chapter 7 filers are required to undergo credit counseling. This process must be overseen by an approved agency, and debtors can take credit counseling on an individual basis or within a group setting. Some credit counseling sessions may result in a debt management plan, which must be filed with the bankruptcy court. If there are no approved agencies available, the credit counseling requirement may be waived so that the bankruptcy process can proceed.