Before 2005, it was up to the judge to determine whether a debtor could file for Chapter 7. Judges had substantial leeway when assessing debtors’ finances, and as a result, most people opted to discharge debt even when they were capable of repaying it under Chapter 13. Under new laws, debtors must meet certain criteria to gain eligibility for Chapter 7. Read on to learn when a debtor may not be able to file for Chapter 7 bankruptcy.
Income is Above the Limit
Chapter 7 eligibility requires an assessment of the debtor’s income through a means test. During the first phase of testing, the debtor must compare their average income over the past six months with the state median. Eligible income includes that from the following sources:
* Salary, wages, tips, overtime and commissions
* Gross income from farming, a business or a profession
* Dividends, royalties, and interest
* Rental income
* Spousal and child support
* Retirement and pension income
Filers are not required to include tax refunds and Social Security benefit payments. If the person’s current income is at or below the state median, they may file for Chapter 7. If, however, their income exceeds the median, they must go on to the second phase of means testing.
Filers May Repay Some Debts
If the person’s income is over the state median, a Bankruptcy Attorney St. Charles MO will evaluate their level of disposable income to determine whether they can pay some creditors via a repayment plan. If the filer has enough money left over after paying for rent, utilities, and food, they can repay some creditors, and the court will dismiss the case.
A Previous Dismissal Within 180 Days
A filer is ineligible if they have had a Chapter 13 or Chapter 7 case dismissed within 180 days. The dismissal must have come for one of these reasons:
* Violation of court orders
* The previous case was regarded as fraudulent or abusive to the court
* The person requested the dismissal after creditors petitioned the court to lift an automatic stay
Chapter 7 can help debtors eliminate many debts, and Chapter 13 allows more affluent borrowers to repay some creditors over time. However, debtors must meet certain requirements to file for Chapter 7. Visit the website to find out how a Bankruptcy Attorney St. Charles MO with the Law Offices of Steven K. Brown can help a client determine which chapter suits their needs.