What Is Chapter 7 Liquidation and Do You Qualify For Its Protection
Chapter 7 bankruptcy, also called straight bankruptcy or liquidation, lets filers get protection from creditors and give them relief from their overwhelming debts. It enables you to clear most debts right away so you can restart your financial life.
What Are The Qualifications Of Chapter 7 Bankruptcy?
In order to qualify for this type of bankruptcy protection, you need to make less than the median income for folks living in your area. If it’s higher, you could still have Chapter 7 protections but must do a means test to find out the amount of disposable income you have.
How To Do A Means Test?
The Means Test will look at your monthly expenses for rent/mortgage, utilities and payments not added to the bankruptcy process and subtract is from your monthly income. It will then determine what amount of money is available to pay your creditors over a five-year time and multiplying it from your disposable income. If it’s more than $10,000, you will need to set up a Chapter 13 bankruptcy repayment plan.
If the amount is less than $10,000 over that five-year span, there’s still more to look at with the Means Test. If your monthly disposable income is no more than $100, you’ll attain Chapter 7 bankruptcy protection.
With Chapter 7 bankruptcy protection, your exempt assets may be safe. Each state varies in their definition of what is and is not exempt assets. However, they generally include approved pensions, IRAs, and 401K. They may also include personal items, vehicles or your home.
If you’re facing the bankruptcy prospect, it’s important you get in touch with one of our highly experience bankruptcy attorneys at Zhou and Chini to learn how your assets can be protected under your state’s bankruptcy laws.
What Debts Are Not Dischargeable In Bankruptcy?
There are some debts that cannot be dismissed by a bankruptcy such as:
- Child support
- Majority of tax debts
- Student loans