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Qualifying for a Chapter 7 Bankruptcy

Are you currently struggling with so much debt, you have no idea how you’re going to pay it off? If so, there’s a good chance that interest and penalties are adding up by the day and from where you’re standing, it looks like there’s no end in sight.

If your monthly bills far exceed your monthly income, you may want to seriously consider filing a Chapter 7 bankruptcy. With a Chapter 7, many types of unsecured debt can be “erased” or “wiped out.” When debt is discharged through a Chapter 7, it means the debtor is no longer legally obligated to pay it.

Common types of debts that are discharged in a Chapter 7:

  • Medical bills
  • Credit card debt
  • Certain taxes (older than 3 years)
  • Personal loans
  • Utility bills
  • Cellphone bills
  • Money owed for renting a home or apartment

If you have a lot of medical or credit card debt, a Chapter 7 bankruptcy may allow you to wipe out most, if not all of that debt. Debtors in general find Chapter 7 very attractive because it allows people to discharge many types of debts without having to pay anything towards them, especially in "no-asset" cases where the debtors don't have assets to liquidate.

Though Chapter 7 bankruptcy is often the “preferred” bankruptcy for debtors, not everyone qualifies. Basically, Chapter 7 is reserved for low-income filers who really need it.

For debtors with a decent-paying, regular job, they may have to file a Chapter 13, debt-reorganization bankruptcy instead – but even the Chapter 13 has many benefits as well.

You Must Pass the ‘Bankruptcy Means Test’

Are you interested in filing Chapter 7 bankruptcy? If so, you must pass what is called the “Bankruptcy Means Test” first. Essentially, if your income is below New York’s median income for a household of your size, you automatically pass the test.

If your income is too high, you’ll be diverted to filing a Chapter 13 bankruptcy instead. With a Chapter 13 bankruptcy, debtors enter into a repayment plan. With the plan, they make monthly payments for 3 to 5 years.

With a Chapter 13, debtors pay off all or a portion of their debt over the life of the repayment plan. How much are the payments? It all depends on the amount of the debt, and how much disposable income the debtor has each month.

The repayment plan is supposed to be manageable. If it wasn’t, it would defeat the purpose! If you are interested in filing Chapter 7 or Chapter 13 bankruptcy, we can help you determine which bankruptcy is right for you.

To get started, contact DeLorenzo, Grasso & Dalmata today!