When you file Chapter 7 bankruptcy and receive a discharge at the end of your case, you wipe out the vast majority — or even all, in certain cases — of the debt you owe. You can then start fresh with a clean financial slate and begin the process of rebuilding your financial independence. But not everyone who struggles with overwhelming debt qualifies to file for Chapter 7. Below, Ron Lunquist, Attorney at Law, explains what you need to know about how to file for Chapter 7 bankruptcy.
How to Qualify for Chapter 7 Bankruptcy: Passing a Means Test
To file for Chapter 7 bankruptcy in the state of Minnesota, you must first pass something called a means test. This test takes into consideration your income from the past six months, which makes the timing of your filing critical.
At the time you file for Chapter 7, if your income from the past six months falls below the median income for the state of Minnesota, you may qualify for discharge of your debts under Chapter 7. It’s also important to note that your disposable income may not exceed a specific amount, which is also defined in the means test.
But what happens if “fail” a means test because your income is too high? Can you still get out from under your overwhelming debt? When it comes to filing for bankruptcy, Chapter 7 is not your only option. Other types of bankruptcy — Chapter 13 is the most common — are reserved for individuals deemed by a means test to have the ability to repay at least a portion of their debts. To learn more about Chapter 13 bankruptcy basics, check out this Chapter 13 overview.
A Means Test Is Not the Only Determiner of Chapter 7 Eligibility
“Passing” a means test does not automatically qualify you for Chapter 7 bankruptcy. Rather, the means test functions more as a preliminary screening. If passed, there is a presumption that you qualify, and anyone who disputes your eligibility for Chapter 7 has the burden of proof to demonstrate your ineligibility.
The same idea applies to “failing” a means test. Not passing does not automatically bar you from filing for Chapter 7. Rather, if you and your attorney believe you truly qualify for Chapter 7, you’ll have the burden of proof to demonstrate your eligibility.
Additional Requirements to Qualify for Chapter 7 Bankruptcy
If you can prove you do not have the ability to repay your debts and filing Chapter 7 bankruptcy appears to be the best option for your needs, you’ll also need to meet a few other requirements. These include:
● Completing credit counseling from an approved agency within 180 days before your filing
● Not having filed for Chapter 7 within the last eight years
● Not having filed for Chapter 13 within the last six years
● Not having a Chapter 7 or Chapter 13 case dismissed within the last 181 days
Keep in mind that if you are not eligible to file for Chapter 7 bankruptcy, you still have options to get out from under your debt. Consulting with an experienced bankruptcy attorney can help you identify the resources available to you and determine whether you qualify to file for other types of bankruptcy.
Considering Bankruptcy? Contact Ron Lundquist, Attorney at Law
Whether you’re currently considering bankruptcy or you’d like to learn more about what it entails and whether it’s the right option for your needs, reach out to Ron Lundquist, Attorney at Law. For over 20 years, I’ve helped Twin Cities residents eliminate their overwhelming debt and start fresh, and I’m here to help you get back on your feet, too. To schedule a free consultation or learn more about how I can help you rebuild your finances, call my Eagan, MN office today at 651-454-0007. You can also connect with me online with any questions, and I’ll be in touch promptly.