In general, no one wants to file for bankruptcy — but, in some situations, it might be the best option. Individuals who file for bankruptcy typically file under Chapter 7 of the bankruptcy section of the United States Code. This article examines what everyone thinking about filing for bankruptcy under Chapter 7 needs to know.
Who Can File?
Not everyone is eligible to file for a Chapter 7 bankruptcy; you must meet certain requirements. For instance, the law requires that filers have an income below or equal to their state's median income to file without any other conditions. If your income is higher than your state's median income, the court will look at your monthly disposable income. If you have enough disposable income to pay at least some of your unsecured creditors, the court might reject your Chapter 7 filing. In this case, you might still file under another section of federal bankruptcy law, Chapter 13.
Also, if you have had your debts discharged through Chapter 7 in the last 8 years, you cannot file for bankruptcy. You also can't file if you have had a bankruptcy petition dismissed by the court in the last 180 days. Defrauding or attempting to defraud any creditors could lead to your filing being dismissed as well.
A debt that you can eliminate through bankruptcy proceedings is known as a dischargeable debt. Many types of debt are dischargeable under Chapter 7 rules. Most unsecured debts, which include medical bills, credit card debt, utility bills, back rent, and personal loans are dischargeable under Chapter 7. An unsecured debt is a debt for which you have not put up any collateral.
Whether or not tax debt can be discharged is a complex matter. In some cases, tax debt that is more than 3 years old can be discharged.
Not all debt can be eliminated through Chapter 7 proceedings. Two of the most important types of non-dischargeable debts are spousal support and child support. For example, if you are having your wages garnished to pay for spousal support or child support, filing for Chapter 7 will not remove the garnishment.
A lot of tax debt, particularly recent tax debt, cannot be discharged. Student loans are generally not dischargeable, although you can file a hardship case and try to get an exception.
Also, debt that was incurred due to fraud and restitution for criminal acts is non-dischargeable.
To learn more about filing for Chapter 7, consult a bankruptcy attorney in your city.