Are You Eligible?
A common misunderstanding about the bankruptcy process is that anyone can apply at any time and from any location. This is not true. Despite the fact that the bankruptcy process is accessible to the vast majority of individuals, there are requirements that must be met in order to qualify.
The first obstacle to your bankruptcy eligibility is your debt and income levels. A bankruptcy applicant is evaluated using a means test. This test compares your income to that of the state's median income. If your income is below the median income level, you automatically qualify for Chapter 7 bankruptcy. If your income is greater than the median income level, your total debt and number of dependents are also considered. At this juncture, your income could make you eligible for Chapter 7 bankruptcy. However, if your disposable income is deemed sufficient for repayment, you will instead be eligible for Chapter 13 bankruptcy.
Case filing location is a consideration that is frequently overlooked. You cannot petition for bankruptcy in any court other than the district court of your state of residence. The general rule is that you must file your bankruptcy petition in the district court where you have resided for the previous 180 days. If you have not resided in your current residence for at least 180 days or if the preponderance of your assets are located in another district, you may file in the court of that other district. Some states require you to have lived in your current residence for at least two years in order to claim your state's exemptions; otherwise, you may only be able to claim protection for your assets under federal bankruptcy exemption laws.
Your prior experience with the bankruptcy procedure, if any, may also be a potential roadblock when registering for bankruptcy. If you have previously had your debts discharged through bankruptcy, you may be required to wait a certain amount of time before becoming eligible again. For instance, if your debts were discharged in a prior Chapter 7 filing, you must wait at least eight years before filing another Chapter 7 case and at least six years before filing a Chapter 13 case. If your debts were discharged in a prior Chapter 13 case, you must wait at least four years before filing for Chapter 7 or two years before filing another Chapter 13 case.
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