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What are the qualifications for bankruptcy?

| Jan 18, 2023 | Bankruptcy, blog |

For many people, bankruptcy provides some relief from stressful debt and persistent creditors. Although anyone in the United States could file for bankruptcy, there are eligibility requirements that determine which type to file and the potential for approval.

Debt discharge requires credit counseling, passing the means tests and several other criteria.

Debt amounts for bankruptcy

Under United States laws, there is no minimum amount of debt required for an individual to pursue bankruptcy. When an individual can no longer manage their debts, discharge is an option for regaining financial footing. The court looks closely at a person’s financials, and in some cases, determines alternatives to bankruptcy for paying off reasonable debts.

Time limits for bankruptcy

There are restrictions on how often a person can file for bankruptcy. If you are pursuing Chapter 7 bankruptcy, you are unable to file if there is a previous bankruptcy case within the last six to eight years. Individuals must also complete a credit counseling course a minimum of 180 days prior to filing. If your first bankruptcy attempt got thrown out, you must wait an additional 181 days before trying again.

Income requirements for bankruptcy

The bankruptcy means tests determine how much an individual can afford to pay their creditors. This is a complicated formula that assesses income, household size, deductions and more. Calculations that take into account expenses and income aid the court in determining disposable income against the amount of unsecured debt.

Passing the means test allows an individual to continue pursuing Chapter 7 bankruptcy. However, the court takes these results and more into account when approving bankruptcy for an individual.