There is no amount of debt that a party must have to qualify for Chapter 7. Furthermore, Chapter 7 bankruptcy, so named after US Code Title 11, Chapter 7 – Liquidation, may be your only chance to escape from under the burden of crushing debt.
According to the United States Courts, in this process, a party declares that they no longer have the financial means to pay creditors. The goal of a Chapter 7 bankruptcy is to have a court declare their debts satisfied and cease ongoing or new collections efforts. This process is available to individuals, married couples, and companies.
In 2005, Congress recognized that some parties in the past may have used Chapter 7 as a way to avoid paying creditors while maintaining a high level of income. Because of this, Bankruptcy courts have the power to dismiss a request for debt relief if a petitioner has a sufficiently high income.
As a result, it is best for people to fully evaluate their financial situation before filing for Chapter 7. If debt remains a problem, it may be beneficial to consider a private settlement with creditors or pursue bankruptcy under Chapter 13. Discussing your situation with an experienced bankruptcy attorney at Farmer & Morris Law is the best way to find out all of your options.
Amount of Debt Must a Party Hold to Qualify for Chapter 7
The federal bankruptcy codes are a complex and lengthy set of laws that determine which parties have the ability to declare bankruptcy and what the effect of that declaration will be. For some forms of bankruptcy, a party cannot have an extravagant amount of debt. For example, parties seeking relief under Chapter 13 cannot have more than $419,275of unsecured debt per person (adjusted for inflation).
Thankfully, there is no such upper limit on Chapter 7 proceedings. It follows that there is no lower limit either. However, you need to consider what Chapter 7 will accomplish and how it will meet those goals.
The bankruptcy court in Chapter 7 proceedings will appoint a trustee. That trustee takes on the job of searching non-exempt assets and selling them to accumulate cash. The trustee then distributes that cash to your creditors in an attempt to satisfy your debts. However, most individuals who file Chapter 7 are able to exempt all of their assets.
Some people may be affected if they own substantial financial assets, real estate, or valuable business assets. While any person or company may file for Chapter 7 without regard for their amount of debt, it may not be advisable to do so. Talking with an attorney can provide more information and advice about the Chapter 7 process.
For a legal consultation, call 828.286.3866
The Means Test as a Potential Barrier to Chapter 7 Relief
The law presumes that parties seeking Chapter 7 relief are eligible. However, the law is also aware that parties have attempted to abuse the system in the past. Nothing under the law says that debtors cannot continue to earn income during the process. That being said, if a person is earning income above the state’s median, the court will perform a means test to determine if they are eligible for Chapter 7 protection.
If a person does not pass the means test, the court has the power to dismiss the request for relief. Alternatively, the court may convert the petition to another form of bankruptcy. The court may then be implementing a Chapter 13 proceeding that does not require liquidation but does involve the submission of monthly payments to repay some or all of your creditors.
How a Lawyer Can Help
It is beneficial to hire a lawyer when you are considering bankruptcy Some tasks a lawyer can do for you include:
- Showing you your legal options
- Handling all communication with relevant parties
- Helping you file all legal documents in a timely manner
- Accounting your debts and assets
This is not an exhaustive list of all a lawyer’s services. You may want to consider consulting one to find out more.
Get Legal Help Today
Farmer & Morris Law, PLLC can help to answer your questions and concerns about bankruptcy. We can explain the Chapter 7 process and whether pursuing this option for debt relief is right for you.
Give us a call today at (828) 286-3866 to learn more about how we can help you.