A Chapter 7 bankruptcy is the type of bankruptcy that most people think of when filing for bankruptcy. It is generally known as the “fresh start bankruptcy.” The ultimate goal of the Chapter 7 case is to allow a debtor to clean out debt and be free from their creditors.
In order to qualify for a Chapter 7 bankruptcy there are basically three criteria that a debtor has to meet:
The first qualification is that the debtor cannot have property that is worth a large amount of money. If a debtor does have property like that the bankruptcy trustee can step in the debtor’s shoes and sell that property to pay back some of the creditors. Many debtors believe that their house or car does not fall into this category, but that is a common misconception. If a debtor has a large amount equity in a home or car the bankruptcy trustee could look into selling that property. This is one of the huge mistakes people make when trying to file for bankruptcy on their own. The bankruptcy rules require that you disclose all property, no matter what it is, and provide an approximate value for the property. There are limits on how much value your property can have before the bankruptcy trustee can force a sale of such property when you file a case. Come in for a free consultation with one of our attorneys to see if there will be any issues with your property.
The second qualification for filing a bankruptcy is based on the income a debtor has. Basically, if a debtor is making enough money to pay back their creditors they would not be qualified to file a Chapter 7 case. This makes sense in that a creditor should not have their debt simply wiped out if someone can afford to pay it. As part of every filing the Debtor has to prove what their income is by providing paycheck stubs (or some other proof of income if pay check stubs are not available). If that income is over a certain limit the Debtor would not qualify to file a Chapter 7 case. This limit goes up depending on how many people are in the household of the person wanting to file. If someone is not qualified to file a Chapter 7 case because their income is too high, a Chapter 13 case is usually available to debtors in this situation and they will still be protected from their creditors. If you want to see if you qualify to file a Chapter 7 our attorneys can evaluate your income level at a free consultation.
The third qualification is that the debtor must not have completed another Chapter 7 case within the last eight years or a Chapter 13 case in the last six years. For example, let’s say a debtor wants to file a bankruptcy on 5/21/2016, that means that debtor could not have filed another Chapter 7 after 5/21/2008 to be able to file another Chapter 7 case at this time. If the debtor previously filed a Chapter 13 case, however, the time limitation is only six years (in order to receive a discharge). Therefore, he would have had to have filed his Chapter 13 case before 5/21/2010 in order to receive a discharge in that case.
These three qualifications are a basic overview of how to qualify for a Chapter 7 case. The law itself is much more complicated. Our attorneys know that law inside and out and can evaluate whether or not you qualify for a Chapter 7 case. Consultations are always free at our frim and we will be happy to assist you.
If you have questions about whether or not you qualify for a Chapter 7 or Chapter 13 bankruptcy, or if you have any other questions related to bankruptcy, please do not hesitate to give us a call at 636-352-2030 or check out our website at www.klinelawstl.com. We have offices in both St. Charles and St. Louis County and the consultation is always free.