Can I file Bankruptcy? Qualifications for Filing Chapter 7 and Chapter 13

October 14, 2010

Despite the stress that comes with having too much debt, most people would rather do anything than file bankruptcy. From the embarrassment of financial failure to the embarrassment of not preventing it, our culture looks down on bankruptcy. But bankruptcy is also a result of our culture; where buying on credit is encouraged, and credit lines are extended to those who can’t afford them.

Can I File Bankruptcy With Dignity?

Instead of viewing your debt as a failure, it helps to ask whether your spending habits are informed by cultural values that lead to debt. In most cases of un-payable debt, this is the case, making bankruptcy a respectable decision and not one that should stigmatize the filer. Once you feel comfortable with bankruptcy, you’ll need to answer a simple question: can I file bankruptcy under Chapter 7 rules, Chapter 13 rules, or both? Below, we list the qualifications for each type.

Qualifications for Chapter 7

The sole qualification for Chapter 7 bankruptcy is that an individual’s average gross income must fall below the median income for his or her state for the last six calendar months, excluding any Social Security benefits. If you are married, your spouse’s income will be included, unless you file separate tax returns and declare separate households.

There are also cases where individuals whose income is more than the state median qualify for Chapter 7, a situation that should be determined by a bankruptcy lawyer.

Qualifications for Chapter 13

The majority of filers whose income exceeds their state’s median must file for Chapter 13 bankruptcy, which lets you pay on your debts for a certain period of time (usually 3-5 years) under affordable arrangements. To qualify for Chapter 13, you must have a source of income; your total unsecured debt must be roughly $250,000 or less; and your total secured debt must be $750,000 or less.

Some people view bankruptcy as a tragedy. But for those with too much debt, it offers a new beginning and a second chance to spend wisely. If you are thinking about filing bankruptcy, understand that your decision requires courage, and consult with a bankruptcy lawyer before you decide whether Chapter 7 or Chapter 13 is the best choice.

Leave a Comment

Previous post:

Next post: