What Disqualifies You From Chapter 7 Bankruptcy?
A Chapter 7 bankruptcy is a debt elimination program which can give people the fresh start that they need to get out ahead of their debt. If you’re already facing calls from creditors, garnishment of wages and you are finding it difficult to pay off some of your personal loans you may be wondering how you could qualify for Chapter 7 bankruptcy. Many people wonder what the qualifications might be to file for this type of bankruptcy but there are certainly some factors that could quickly prohibit you from filing for bankruptcy as well. Wondering what disqualifies you from chapter 7 bankruptcy? In this article, we are going to detail some of the main factors behind your eligibility for chapter 7!
Your Income is Too High
In order to qualify for Chapter 7 bankruptcy income standards are put into place to determine who can eliminate debts under a Chapter 7 bankruptcy program. When someone has wages that are below the median income level for the state, it may be difficult for them to continue to afford paying additional money towards their debts. If your income level is far exceeding the median income level for the state of Florida, a Chapter 13 bankruptcy arrangement for repayment may be what a trustee would prefer to offer you rather than complete debt forgiveness. If it’s determined that you could continue to pay back a portion of your debt under Chapter 13 bankruptcy, it’s unlikely that your debts will be completely discharged and that you would qualify for Chapter 7 bankruptcy.
Median incomes levels are calculated by the total household median income. There are also some further steps to determine eligibility through a means test. This is where your median income is factored into the calculation as well as the disposable income that you have every month. Failing a means test is a surefire way to be disqualified from chapter 7 bankruptcy.
You Have Too Many Assets
Chapter 7 bankruptcy will allow you a certain dollar amount of exemptions for your property, retirement savings, wages and assets like vehicles. You can protect some of your assets under Chapter 7 but if you have a business, a series of properties or several vehicles it could be possible that these assets will be sold off in order to pay for your debt relief. An evaluation of your current assets would determine how much of these assets would be protected and if filing for Chapter 7 would lead to the full liquidation of these assets in order to settle with your creditors. If you are the type of person that manages multiple properties or you have a number of expensive assets like antiques, you could be facing having these items all liquidated in order to pay your debts.
You’ve Made Excessive Luxury Budget Purchases
A trustee will perform extensive research to figure out what exactly put you into debt. If you have assets such as a premium luxury car, a booked vacation, a motorhome, a boat or a vacation home, none of these items would be considered to be a reasonable asset. Under Chapter 7 case it’s very possible that these assets will be liquidated or refunded. If you’ve made a luxury purchase that goes outside of your budget it is important to disclose this as an asset under your bankruptcy filing as well. Even if you don’t think that the item may be valuable, the trustee will need to know about the asset and if they could liquidate it to pay off a portion of your debt.
You’ve Previously Filed For Chapter 7
You will only be eligible to file for Chapter 7 bankruptcy once every eight years. This time period is based off of the filing date for the previous case that you faced. If it’s been under eight years since you last filed for a chapter 7 bankruptcy you may be able to file for a chapter 13 bankruptcy and receive a discharge.
Between 1 to 4 years after you file for Chapter 7 bankruptcy you will be eligible to file a Chapter 13 bankruptcy to stop creditor actions and gain legal protection. It’s possible that you can defer and consolidate unsecured debts during this time. You will not be eligible for a complete discharge of your debts until the filing process is completed. Under this type of arrangement you will pay back a percentage of what you are owed to unsecured creditors and the rest will be discharged at the completion of your agreement.
If it’s been over eight years since the last filing date of your chapter 7 bankruptcy you will be eligible to refile for Chapter 7 bankruptcy once again.
You’ve Been Delinquent on Your Property
You may be denied the option to file for Chapter 7 bankruptcy if you are behind on your vehicle payment or home payment and you cannot bring in these payments prior to filing for bankruptcy. You should file for Chapter 7 or Chapter 13 bankruptcy before you get behind on your payments so that you do not lose your property. If you’re regularly behind on income taxes or property taxes it is also important to evaluate the option for Chapter 13 bankruptcy so that you could resolve your debts faster.
Consider some of these disqualifying factors if you are going to be considering Chapter 7 bankruptcy as an option for your financial future. Contact us today for more information!