Chapter 7 Bankruptcy - 3 Reasons You May Not Be Eligible

If you are looking for a way out of your debts, you may be thinking about declaring chapter 7 bankruptcy. While this route is often a desirable one, it is not always the best for every debtor. For this reason, you need to get a lawyer to make sure this is the best method of eliminating your debts. There are other ways of stopping the calls from creditors, so if you find that you are not eligible for this method, do not worry. Just speak to attorney for additional information on your options.

One of the first ways to know you are not ready for chapter 7 bankruptcy is if you have something to lose. While you may be able to keep a house with no equity and a cheap car that gets you to and from work, you cannot count on being able to keep much else. If you have a few homes and cars that you are struggling to pay off, but wish to keep, you should take another route. You won't be required to pay them off, but you can’t keep them, either, as the trustee will sell everything possible to get your creditors at least some of the money you owe. Expensive furniture, electronics, and other non-necessities will also likely be gone, too, so consider other methods of getting out of debt if you have these.

If you are tired of being hassled about your student loans, alimony, child support, or unpaid taxes from last year, don't assume that chapter 7 bankruptcy will get rid of them. These are the only debts you cannot write off with this method. Only in extreme cases can you get out of paying them this way, meaning you have to show that paying them would cause undue hardship. This typically requires you to be disabled and unable to work, so even if you have the best lawyer possible, you cannot count on this working out.

If you make more than the average income in your state, and you have a good amount of money left after paying your bills, you probably will not qualify for chapter 7 bankruptcy. Your lawyer will let you know the limits for your state, but if you already suspect that you make too much, start looking at other options. Your income can be a bit higher than the median for your state, but you then have to pass the means test, which calculates what you have after paying certain bills. Even if you feel like you are always broke, know that the government does not include in the means test some bills it considers nonessential, so the result may show that you have more left over than you really do. Either way, you cannot qualify if you do.

However, you do have other options. Most people do qualify for chapter 13, so start learning the rules of this route if you want to erase your debts. You will have to make payments to creditors for three to five years, but you can stop the calls from bill collectors, and reduce the balance of some debts this way.