There are two options available to a debtor to file their bankruptcy case. One of them is to file for Chapter 7 bankruptcy and other one is a Chapter 13 bankruptcy. Chapter 13 bankruptcy is a way to reorganize debt into a form of repayment procedure. Chapter 7 bankruptcy or “liquidation bankruptcy” removes all sorts of debt that can lead to expungement. This chapter determines who all qualifies for filing a bankruptcy case, method to file, and type of debt that is qualified for discharge.
Who can qualify for Chapter 7 Bankruptcy?
Every state has its set of income guidelines. According to chapter 7 bankruptcy attorney, a person who files for bankruptcy has to fall within the income criteria of the state to be considered for Chapter 7 bankruptcy.
Income criteria set by bankruptcy rule determine those debtors who are eligible to file for “Chapter 7 bankruptcy”. To qualify under income rules, the income of the filer should be equal or below the average income in the state of the filer.
Who would not qualify for Chapter 7 Bankruptcy?
Under this bankruptcy rule, there are a few cases when the debtor does not qualify:
- Discharge of earlier debt within the last 8 years under “Chapter 7”;
- Discharge of earlier debt within the last 6 years under Chapter 13;
- Income, debt and expenses would not qualify for a Chapter 13 filing;
- The debtor tried to defraud bankruptcy court or creditors;
- The debtor missed attending credit counseling
What is the best way to file your bankruptcy case under Chapter 7?
A debtor is needed to attend credit counseling before filing for bankruptcy under “Chapter 7”. On completion of this counseling with a state approved agency can a debtor legally file for his case at a local bankruptcy court?
As a debtor, there are certain things that you would need to furnish. These are income information, debt, expenditures, and creditor holdings of unsecured and secured debt, property sale documents, and details of all those properties that are exempted.
What are the non-dischargeable debts under Chapter 7 bankruptcy?
Some of the key main non-dischargeable debts are:
- back child support
- alimony obligations
- student loans whose repayment leads to an undue hardship
- less than 3 years of pending income taxes
- debts for luxuries that you have purchased recently
- Debts incurred due to fraud. It can be telling a lie to credit agencies or putting wrong information on a check
- debts resulting from malicious or willful injury to another’s property
- debts due to a violation of trust
Types of property that are exempted from Chapter 7
Certain types of property are completely exempted in most of the states. These are
- motor vehicles that cost a certain value
- necessary clothing
- needed household goods and furnishings
- household appliances
- jewelry till a certain price
- life insurance up to a certain price
- Unpaid but earned salary
- Public benefits such as welfare, unemployment compensation, social security that is deposited in a bank account.
A better understanding of Chapter 7 and Chapter 13 bankruptcy will help you decide which one would be the right option for your case.