While Chapter 7 is the most common form of bankruptcy, qualifying for it is difficult. Here are the different ways through which you can qualify for this chapter:
- This bankruptcy chapter is meant for people with low household income than the state’s average household income of the same size. For example, a person in Louisiana can qualify for Chapter 7 bankruptcy if their annual income is less than $47,488. The limit in Texas to qualify for Chapter 7 bankruptcy is having an annual income of $52,953.
- If your income exceeds the state average, the other way you can qualify for Chapter 7 bankruptcy is if you can show that you do not have sufficient income to support the chapter 13 repayment plan. This is done by using the Means test. Your disposable income is calculated after subtracting your essential expenses from your monthly income. Suppose the disposable income is insufficient to repay your debts through the Chapter 13 repayment plan. In that case, you can qualify for Chapter 7 bankruptcy.
- Individuals who failed the means test can qualify for Chapter 7 bankruptcy if they can demonstrate that special circumstances such as loss of a better paying job, operational expenses not considered in the means test, seasonal income inflating the means test results, etc., are at play.
- There are two ways you can be granted exemption from the Means test. This includes showing that more than 50% of the debt is because of a failed business or that you are a disabled veteran. These two criteria can allow you to file for Chapter 7 bankruptcy while avoiding the means test.
What happens if you fail to qualify?
If you fail to qualify for Chapter 7 bankruptcy, other options are available. However, it is important to remember that Chapter 7 involves the liquidation of your non-exempt property. Despite the presence of several federal and state laws to protect your assets, you might end up losing several of your property in the Chapter 7 bankruptcy case. Therefore, it is important to consult an attorney before filing for Chapter 7. This is important to ensure that it is the right move to get rid of your debts. Call 888-297-6203 to discuss your options while filing for bankruptcy with bankruptcy lawyers in Texas.