Chapter 7 Eligibility

The Federal Government does not allow everyone to file for Chapter 7 bankruptcy. Before you can even begin the complicated process, you are required to pass the means test. Though this test was designed to limit the number of debtors granted relief, most people pass it with ease. 

There are situations, however, where you can still be denied Chapter 7 relief if you passed the means test. But do not worry, you may still be eligible for other forms of debt relief. A bankruptcy attorney can help you determine if you qualify for Chapter 7 discharge.

Bankruptcy Attorney in Dallas County

Deciding to file for bankruptcy is not an easy decision to make. By the time the option is usually considered, bills have already piled up, and calls from debt collectors have become too much. Linda Littlefield understands the legal, emotional and financial consequences that entail filing for bankruptcy. She will help you determine if you are eligible for Chapter 7 discharge and achieve the financial relief you deserve. 

Call (972) 812-0900 to get started. Littlefield Law Firm assists clients with bankruptcy and related issues in Dallas County, Collin County, Kaufman County and Rockwall County.

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Chapter 7 Means Test

To be eligible for Chapter 7 bankruptcy in Texas, you must first pass the means test. This test was added to Chapter 7 proceedings in 2005 to prevent wealthy debtors from taking advantage of the process. The test will compare your yearly income to the Texas median income for a household of the same size. Debtors with an income below the state average are exempt from the test and automatically qualify for Chapter 7 relief.

Below is the median income for Texas households based on family size, per the U.S. Department of Justice:

  • 1 Person: $47,238
  • 2 Persons: $63,148
  • 3 Persons: $69,294
  • 4 Persons: $78,572
  • 5 Persons: $86,972

You pass the means test if your income is below the average for the size of your household. Once you are eligible, you can initiate the Chapter 7 discharge process and seek relief from most unsecured debts.

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Who is Not Eligible for Chapter 7?

Anyone with an annual income greater than the median will not be able to file for Chapter 7 discharge. That being said, though, certain debtors who pass the means test will not qualify for Chapter 7 bankruptcy unless they qualify for certain exceptions. Most of the factors that disqualify a debtor for this type of relief deal with their actions during the bankruptcy proceedings.

Disqualifying factors include:

  • Refusing to explain lost assets
  • Failing to complete the required personal finance management course after filing
  • Acting with intent to defraud a trustee or creditor
  • Failing to obey orders and answer questions from the bankruptcy court
  • Receiving Chapter 7 relief within the last eight years
  • Receiving Chapter 13 relief within six years, unless 70 percent or more of the unsecured debts were paid

Debtors who do not qualify for Chapter 7 because their income is above the state average have additional options. If you are close to the median or a little bit over, you may be able to reevaluate your finances and find additional expenses that may be deducted. If that is not enough, then you may be eligible for Chapter 13 discharge. 

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What Debts are Eligible for Chapter 7 Discharge?   

Chapter 7 bankruptcy will relieve debt and allow you to take back control of your finances. Keep in mind that only debts that dischargeable will be wiped out at the end of your case. These debts include:

  • Credit card debt
  • Personal loans
  • Medical bills
  • Promissory notes
  • Most debts from car accidents
  • Lawsuit judgements against you, but not associated liens
  • Lease and contract obligations

Creditors of dischargeable debts can ask a bankruptcy judge to declare qualifying debts as non-dischargeable. Debts that may be labeled as such include:

  • Debts from a breach of trust, larceny or embezzlement
  • Debts from malicious or willful injury to another person or property
  • Debts incurred from fraud
  • $1,000 or more of cash advances or loans taken within 90 days of filing
  • $725 or more of luxury goods or services purchased on credit within 70 days of filing
  • Debts owed from a divorce or settlement, unless:
    • The benefits of discharge outweigh debts to the ex-spouse; or
    • The debtor could still not afford the debt after bankruptcy

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 Additional Resources

Median Family Income by Family Size | U.S. Department of Justice – Follow the link provided to view a chart with the median income for every state in the U.S. You can see how Texas compares to other states and find out how much is added for each additional person in a house after four. The chart is provided by the U.S. Department of Justice. 

Bankruptcy | United States Code – Read the section of the United States Code governing bankruptcy. You can learn about the powers of the court, the penalties for fraudulently filing and how a trustee will treat certain liens. The code can be read on the Legal Information Institute website, an online legal resource provided by Cornell Law School.

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Bankruptcy Lawyer in Dallas

The internet will not provide you with the resources you need to file for Chapter 7 bankruptcy. Grant yourself peace of mind and contact a bankruptcy attorney. Littlefield Law Firm is 100% dedicated to bankruptcy law. With nearly 25 years of experience, Linda Littlefield is well prepared to answer your bankruptcy questions.

Call (972) 812-0900 to schedule a time to speak with Ms. Littlefield. Littlefield Law Firm helps clients with bankruptcy in areas such as Dallas, Plano, Kaufman and Heath.

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