What is Chapter 7 Bankruptcy?
There are several types of bankruptcy. Chapter 7 is often called the straight bankruptcy process and the most common among all bankruptcy chapters. It allows the debtors to eliminate most of their debts within three to six months from the date of the bankruptcy filing.
This type of bankruptcy is commonly used by individuals who don’t have enough income to pay back what they owe to their creditors. It pays off most of their unsecured debts through liquidation of assets to help them gain a fresh start and rebuild their credit in six months. Chapter 7 bankruptcy also provides immediate bankruptcy protection to the debtor once all necessary paperwork has been filed in the United States Bankruptcy Court with the aid of a competent bankruptcy attorney.
Debt Amount Needed to File for Chapter 7 Bankruptcy
There is no minimum amount of debt that you should owe to be able to file for a Chapter 7 bankruptcy.
Does that mean anyone who wants to get out of debt is qualified for Chapter 7?
Short answer – No.
Not everyone can qualify for a chapter 7 bankruptcy. The United States bankruptcy code would require you to take a two-part means test to determine eligibility.
The first part of the means test determines whether your total family income is lower than the median income. Suppose your monthly payment is higher than the state median. In that case, the court will then proceed to the second part of the test. They will consider your monthly living expenditures, secured debt payments, and allowances for three months to determine if there would be enough disposable income to pay all your debts. When the result of this test shows no disposable income, then you qualify for Chapter 7.
Once the court has determined your eligibility, the next thing you need to do would be to hire an exceptional bankruptcy lawyer from a respected bankruptcy law firm in Michigan. The bankruptcy attorney competent in bankruptcy laws will assist you in the steps of your bankruptcy proceeding, as mentioned above, to attain financial freedom. They can also attend the meetings on your behalf and guide you in filing for motions or objections when necessary.