When facing any financial crisis, it is important to be familiar with the personal bankruptcy options available to struggling consumers. Because there are requirements to qualify, and different options to consider, it is best to understand eligibility requirements and which option is best for then needs and circumstances of the filing party.
Chapter 7 bankruptcy is a liquidation bankruptcy in which the filing party is able to liquidate non-exempt assets to repay creditors. Because of the nature of this personal bankruptcy option, there are requirements to qualify for Chapter 7 bankruptcy. Those who may not qualify for one reason or another, however, should not despair because additional personal bankruptcy options may be available to them and it may also be able to convert a bankruptcy from one type of personal bankruptcy to another.
What is referred to as the means test is used to determine if the filing party qualifies for Chapter 7 bankruptcy protection. To determine if the filing party qualifies, the bankruptcy court looks at the filing party's average income in the 6 months leading up to filing for bankruptcy protection. If their income falls below the median income in their state, they may qualify for chapter 7 bankruptcy protection. A list of different types of income are considered in the calculation so it helps for the filing party to be familiar with what will be taken into account when determining their eligibility for Chapter 7 bankruptcy protection.
The filing party's ability to repay their debts and their bankruptcy history may also be considered when the bankruptcy court evaluates their eligibility for Chapter 7 bankruptcy protection. Bankruptcy protection options provide important rights to struggling consumers that they should be familiar with and aware of so they can arrive at the best option for them as they struggle with the daily challenges caused by overwhelming debt.