15 years of experience put to work for you

  1. Home
  2.  » 
  3. Bankruptcy
  4.  » Eligibility requirements for Chapter 7 bankruptcy

Eligibility requirements for Chapter 7 bankruptcy

| Nov 3, 2020 | Bankruptcy |

There are many different events in people’s lives in Michigan, which are predictable. However, there are many events that occur that are unpredictable and can have a very detrimental effect on their lives. They may suffer injuries or contract diseases, get laid off, have a family member get injured or sick and other catastrophic events. These events can be very costly and may prevent people from meeting their monthly obligations.

If this occurs, they may need to turn to credit cards or take out loans. Eventually they may find themselves stuck with overwhelming debt. It may get so bad that they may think that they will never be able to get back to even again. However, there are options people have to rid themselves of overbearing debt and one of those options is Chapter 7 bankruptcy. Through this process people can have their debt discharged, but they must meet certain requirements to be eligible.

One of the requirements is that the debtor must not have had a previous bankruptcy petition involuntarily dismissed within the previous 180 days. Also, within the previous 180 days, the person must have completed credit counseling. It does not matter how much debt the person has or whether they are solvent or not, but if they make more the median income for the area they live in they must pass a means test.

Means test for eligibility

The Chapter 7 bankruptcy filing is presumed abusive is the person’s average monthly income for the previous five years is $12,850 or 25% of the total amount of their nonpriority unsecured debt, but that amount must be at least $7,700. People can overcome this presumption of abuse though if they can show there are special circumstances justifying their expenses or adjustments to their income. If they cannot rebut the presumption, the case will be converted to Chapter 13.

There are many reasons why people in Michigan fall into debt. However, it does not matter why they fell into debt, people do have the option to file for Chapter 7 bankruptcy, rid themselves of debt and achieve a fresh start. This can be a complicated process though and consulting with an experienced attorney could be helpful.