Chapter 7 bankruptcy is the most popular of the bankruptcy filing options as it discharges most debts and relieves the filer of most financial responsibility to pay back creditors. Most Chapter 7 cases last only 3 to 6 months. Read on to learn about how those interested in Chapter 7 bankruptcy can qualify.
Pre-Filing Credit Counseling
One requirement before filing is to complete credit counseling. These courses are offered by certain approved agencies and once completed, prospective filers will receive a certificate that must be filed with the court as a part of the process.
Passing the Chapter 7 Means Test
The means test compares the filer’s average monthly income for the six months preceding the bankruptcy against the median income for a similar-sized household in his or her state. If the filer’s income is below the median, the filer automatically qualifies. In Arkansas, the median income for cases filed after November 1, 2020, is $46,120 for households of one, and $67,349 for households of four.
Qualifying for Those Above the Median Income
For those with higher incomes, they’ll complete the second portion of the means test and deduct all applicable expenses to determine if there’s any viable income left over to pay creditors. Expenses vary by county and type.
What If I’ve Previously Filed for Bankruptcy?
Anyone who has filed a Chapter 7 petition and received a discharge must wait eight years from the prior filing date before filing again. If a prior petition was filed but never finished, there’s no need to wait before filing a new case. If you have previously filed a Chapter 13 petition and received a discharge, you must wait six years from the Chapter 13 filing date before you are eligible to file a Chapter 7 and receive a discharge.
What if My Property isn’t Exempt?
If you have property that you would like to protect from your creditors, the bankruptcy exemptions offer a way to do so. If your property is not exemptable for some reason, we generally caution against filing a Chapter 7 Bankruptcy, even if you otherwise qualify. Chapters 11 and 13 provide an opportunity for those filers with non-exempt property to pay their creditors over time while keeping their assets, rather than having those assets sold. Any transfer of property within the 3 years before the filing of the case may also affect whether Chapter 7 would be the best choice.
A Note About Student Loans
Previously, federal student loans were not considered dischargeable under bankruptcy law. As the student loan crisis deepened in 2020, some courts have changed that course and now allow large amounts of student loan debt to be discharged. These decisions are not yet widespread but are increasing in prevalence. Student loan dischargeability depends greatly upon the filer’s particular circumstances.
If you’re in a difficult financial situation, a Chapter 7 filing may be right for you. Call Natural State Law today at (501) 916-2878 to learn more about Arkansas-specific bankruptcy law and potential best options for your case. We can use your information and to determine whether you have any means test issues.