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Who can file for Chapter 7 bankruptcy?

On Behalf of | Apr 7, 2021 | bankruptcy |

Bankruptcy is a complex legal process. It involves the balancing of financial matters with the application of laws to protect and support the needs of people with overwhelming and insurmountable debts. In Maryland, individual debtors can choose from Chapter 7 bankruptcy and Chapter 13 bankruptcy to achieve their debt relief needs.

Chapter 7 bankruptcy has specific requirements that individuals must meet in order to qualify for its protections. This post will discuss some of those requirements, but readers should remember that no legal advice is conveyed herein. When questions about bankruptcy come up, it is important that individuals seek the counsel of bankruptcy attorneys who can answer their case-specific questions.

Financial requirements of Chapter 7 bankruptcy

One of the biggest considerations that is often made when deciding what form of bankruptcy to pursue is whether an individual debtor has any capacity to pay off their debts. If a person has disposable income, they may not qualify for Chapter 7 bankruptcy. Their income will be subjected to a means test, where their monthly income over the prior 6 months will be compared to the average median income in their state. If their income is below the median, then they may use Chapter 7 bankruptcy.

If their income exceeds the state’s median, then they will be barred from using Chapter 7 bankruptcy. They may still qualify for Chapter 13, but instead of liquidating their assets they will create a repayment plan to satisfy their debts.

Other requirements of Chapter 7 bankruptcy

Beyond considerations of income, debtors who want to use Chapter 7 bankruptcy must complete credit counseling and must not have recent bankruptcy filings or discharges. They must meet the technical requirements of the process, and they must work with their bankruptcy courts and creditors to stay on top of their bankruptcy proceedings.

It can be a lot for a debtor to manage bankruptcy on their own. It can become overwhelming if they are unfamiliar with the process. A bankruptcy attorney can support and advise them of how best to address the management of their debts.




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