If your debt is greater than your current income and you appear headed into further debt, declaring bankruptcy is an option you should consider. Chapter 7 can help clear away several unsecure debts, which can bring your finances back on track. While it can have a negative effect on your creditworthiness, filing can be a feasible option if your home is facing foreclosure.
Who is Eligible for Chapter 7 Bankruptcy?
In order to quality for this bankruptcy you:
- Need to complete a credit counselling course from an approved agency at least 180 days before you file.
- Cannot have filed for Chapter 7 bankruptcy in the past eight (8) years or Chapter 13 bankruptcy in the past six (6) years.
Also, the average of your monthly income in the past six (6) months must be less than the income of a household that is the same size as yours or you will have to clear a means test. This will determine if your disposable income is sufficient enough to make partial debt payments to unsecured creditors.
The Means Test
The decision to file for bankruptcy is not yours alone. You will also have to clear a means test ordered by the court to determine whether you are eligible for Chapter 7. As previously mentioned, if you earn less than the median, you are eligible.
In fact, even if your income is higher than the median, you may still qualify after allowable expenses are discarded. Ultimately, if the final calculation shows you have enough money left over after expenses to pay off debts, you may be allowed to file Chapter 13.
Debts Chapter 7 Bankruptcy Can and Cannot Erase
Chapter 7 bankruptcy can do away with dischargeable debts such as medical bills, car loans, utility bills, credit card debt and judgements from debt collectors. However, it cannot erase debts pertaining to child support, alimony, student loans and debts you owe the government, such as traffic tickets and tax debts.
Before you file, make sure you are actively knowledgeable on your debt payments to increase your chances of qualifying. If you are looking for an attorney to help you out, get in touch with ours at Covert Marrero Covert, LLP today. We offer personalized services in Warrenville, Schaumburg or Naperville, Illinois. Get in touch with us for a one-on-one consultation today. We are also accepting virtual conferencing appointments via telephone and video conferencing.