If you ever file for bankruptcy, hopefully it will only be once in your life. However, you can qualify for a Chapter 7 bankruptcy 8 years after you filed a previous Chapter 7. You can file a Chapter 13 and get a discharge four years after filing a Chapter 7. You can actually file a Chapter 13 sooner, but you will not get a discharge. Some people may want to do this to keep creditors from collecting because the automatic stay is in effect during the Chapter 13 plan even though you can not get a discharge.
In general, anybody can file a bankruptcy. You do not even have to be a legal resident of the United States to file a bankruptcy. You do have to take a credit counseling class in order to qualify.
If you file a Chapter 7 bankruptcy and you have a higher income, your case could be dismissed for abuse of the bankruptcy process. After filing a Chapter 7, the court will examine your income going back six months. If this income is higher than the median income for your household size, you must submit to a means test. In Washington, the yearly median income figures are $51,655 for a household of one, $63,803 for a household of two, $69,844 for a household of three and $81,582 for a household of four. Add $7,500 for every household member after that.
The means test takes an average of the last six months income and deducts expenses for it, such as mortgage payments, car payments, day care, spousal maintenance, child support, health insurance among other actual expenses. Some expenses with limits imposed by IRS regulations, such as food, clothes, utilities and transportation, are deducted too. If there is money left over after the deductions, there is a “presumption of abuse”. You can still overcome the presumption of abuse by claiming special circumstances. The United States Trustee has to file a motion to show abuse and the final decision is made by a bankruptcy judge. You have the option to convert your case to a Chapter 13 instead of letting it be dismissed.
There are limits to who can file a Chapter 13. You have to have enough income to fund a plan for three to five years. There are limits to how much debt you can have as well. There are no debt limits in a Chapter 7. However, if you need a Chapter 13 because of income, or some other reason, you can not have more than $1,081,400 in secured debt or $360,475 in unsecured debt. If you have over this debt limit and can not do a Chapter 7, you have to file a Chapter 11, which is very complex and usually reserved for businesses.
If you have questions about bankruptcy, or want to explore your options, contact the experienced bankruptcy lawyers in Tacoma, Washington.