Every person in the United States is entitled to file bankruptcy – so long as you follow the rules. The rules differ slightly depending on whether you are filing under Chapter 7 or 13.
Chapter 7 bankruptcy, also called straight or liquidation bankruptcy, can wipe out many types of unsecured debt. Not just anyone can file for Chapter 7 bankruptcy, though. Here are some of the requirements to pursue Chapter 7 bankruptcy.
The average of your monthly income in the previous six months must be lower than the median income for the same-sized household in your state; otherwise, you must pass what's known as a means test. This test determines whether your disposable income is high enough to make partial payments to unsecured creditors. If you fail the means test, don't despair: You still might qualify for Chapter 13 bankruptcy.
You can't have filed for Chapter 7 bankruptcy in the previous eight years.
You can't have filed for Chapter 13 bankruptcy in the previous six years.
If you attempted to file for Chapter 7 or 13 bankruptcy but your case was tossed out, you must wait 181 days or more before refiling.
You typically must finish an individual or group credit counseling course offered by an approved credit counseling agency within 180 days before you file for bankruptcy.
Even if you're eligible to file for bankruptcy, a judge could throw out your case if it's found you're attempting to defraud creditors. An example: You run up charges on a credit card with the goal in mind of declaring bankruptcy to steer clear of paying the debt.
The requirements for Chapter 13 bankruptcy differ from the requirements for Chapter 7 bankruptcy. Here are some of them.
You must have sufficient income to make the monthly debt payments outlined in your bankruptcy plan.
Your unsecured debts (such as credit cards and medical bills) must be less than $419,275, and your secured debts (like mortgage and car payments) must be less than $1,257,850. These dollar amounts are in effect until April 2022. Debt limits change every three years.
If you attempted to file for Chapter 7 or 13 bankruptcy but your case was tossed out, you must wait 181 days or more before refiling.
You must provide proof that you filed federal and state income tax returns for the past four years.
You typically must finish an individual or group credit counseling course offered by an approved credit counseling agency within 180 days before you file for bankruptcy.
Whether you SHOULD file bankruptcy ... that's another question and will have be part of another blog post. But if you need an answer NOW, call or write and we can discuss your unique situation.
MichiganBankruptcyHQ@yahoo.com
248-666-6004