Eligibility requirements for Chapter 7 bankruptcy

On Behalf of | Jan 2, 2018 | Uncategorized

Connecticut residents looking to eliminate eligible debt and stop repossessions may find the answer in filing for Chapter 7 bankruptcy. As with Chapter 13 bankruptcy, federal law lays out certain requirements a person or entity must meet in order to qualify for Chapter 7. Among these factors, eligibility can be affected by a filer’s financial standing and past record in bankruptcy court.  

The U.S. Courts website points out that to file for Chapter 7, a debtor can be an individual or a business. Eligible businesses can include anything from partnerships to corporations. However, an individual filer may be barred from filing Chapter 7 or any other type of bankruptcy if the person had previously filed for bankruptcy in the past 180 days and did not appear in court. A filer also cannot have dismissed a previous bankruptcy case if the creditors looked for relief from the court to regain property that they hold liens on.

The Findlaw website describes some additional criteria that determines if a person can qualify for a Chapter 7 bankruptcy. The amount of monthly income currently earned by the filer must be equal or below the median of the person’s resident state. In the event a person’s income is higher than the state’s median income, the filer may still qualify if the court determines the individual cannot make payments to creditors under a Chapter 13 bankruptcy after certain expenses, such as food and rent, are met.

Additionally, debtors seeking to file Chapter 7 are required to receive credit counseling by a nonprofit organization. This nonprofit must receive approval from the U.S. Trustee’s office to be considered valid. Unless specifically exempted from the counseling due to reasons such as service in military combat or a physical or mental impairment, a debtor is to be informed of all possible alternatives to bankruptcy before being cleared to file for Chapter 7. A completion certificate will be presented to the debtor after the counseling is concluded.