A bad financial situation can affect anybody anytime. Bankruptcy is one of the most viable solutions to get out of huge financial debts. A person or company can file for bankruptcy under Chapter 7 or Chapter 13. Chapter 7 or liquidation bankruptcy is generally preferred as it takes comparatively less time and gets rid of unsecured debts. However, qualifying for Chapter 7 is one of the primary requirements to get a discharge. According to Dallas based bankruptcy law firm https://bankruptcy.staging.recoverylawgroup.com/, an individual filing for consumer bankruptcy needs to pass the means test, which requires you to have income less than an average household with a similar number of members. Disabled veterans or debtors whose debts arise mainly due to a business operation are exempted from the means test. There are other criteria to consider regarding eligibility for Chapter 7 bankruptcy. These include:
Your income
If your monthly income (average of the last six months) is less than the state median income, then you are eligible for Chapter 7 bankruptcy. If your income is more than the average income, you need to pass the means test. The bankruptcy trustee checks your disposable income to find out if you can repay your debts. Disposable income is calculated by deducting certain essential monthly expenses and required debt payments (secured and priority debts) from your total income. This disposable income is used to pay unsecured nonpriority debts such as credit card bills, personal loans, medical bills, etc. over a period of your repayment plan. Documents submitted while filing for bankruptcy include Schedule I where your income is mentioned and Schedule J which lists your expenses. These are used to calculate your disposable income. If there is enough disposable income, you can opt for Chapter 13 bankruptcy instead of Chapter 7.
Any previous bankruptcy discharges
There is a time limit to filing for bankruptcy and getting a discharge in Chapter 7 bankruptcy case. A Chapter 7 bankruptcy case discharge within 8 years or Chapter 13 bankruptcy case discharge within the previous 6 years you cannot get a discharge in Chapter 7. Additionally, if a previous Chapter 7 or Chapter 13 case was dismissed by the court in the past 6 months due to:
- your violation of a court order;
- your filing was an abuse of bankruptcy system;
- you asked for dismissal when a creditor sought relief from the automatic
Defrauding creditors
Your case might also be dismissed if you tried to cheat your creditors. Concealing assets so that you do not have to pay your creditors or transferring them to family or friends in order to prevent the non-exempt property from being liquidated, is considered fraud by the court. The court might dismiss your bankruptcy case if the trustee finds evidence of:
- a huge amount of debts for luxury items within a stipulated time frame of bankruptcy filing;
- selling of assets to relatives or friends at less than fair market rate;
- hiding money or property from your business partner;
- lying about your debts or income on your credit application.
Failure to disclose any pertinent information regarding your financial affairs or hiding assets to defraud your creditors might get your case dismissed. You might also be prosecuted for fraud.
Incorporated entity
In case the filer is a Corporation or LLC, they cannot get a discharge of their debts in a Chapter 7 bankruptcy case. In this case, the assets of the company are liquidated by the trustee and the fund so generated is distributed among the creditors. For further inquiry, call 888-297-6023 to speak with expert bankruptcy lawyers.