Filing Chapter 7 bankruptcy may provide you with the relief from your debt that you have been seeking. If you qualify for Chapter 7, a trustee will gather and sell your nonexempt assets to pay off your creditors through a process called liquidation.
Like other sections of the Bankruptcy Code, Chapter 7 has eligibility requirements. You must meet these to qualify for debt relief through Chapter 7 bankruptcy.
Credit counseling
According to United States Courts, everyone who files for bankruptcy in the United States, including under Chapter 7, must first complete a course of credit counseling. This must be current, meaning that you must go through credit counseling within six months prior to filing.
Income and debt
Unlike Chapter 13, there are no limits on the amount of debt you can carry and qualify for Chapter 7 bankruptcy. However, if your income level is too great to pass the means test, you do not qualify for Chapter 7 bankruptcy. The amount of unsecured debt that you owe may factor into the means test if it is more than $7,700 and your income is more than 25% of it. If you file for Chapter 7 bankruptcy but do not pass the means test, the court may either dismiss it entirely or ask your permission to convert it into a Chapter 13 bankruptcy instead.
Prior bankruptcy history
The outcome of past bankruptcy filings may affect your eligibility to file Chapter 7. If you voluntarily dismissed a case within the last six months, you cannot file again until 180 days have elapsed. The same holds true if the court dismissed a past case because you failed to comply with its orders.
Both businesses and individuals are eligible to file Chapter 7. This means that, as long as you meet the other requirements, you may be able to file Chapter 7 as a business owner even if you do not qualify for Chapter 13.