When you need to file for bankruptcy, one of the primary things that you have to determine is what type of bankruptcy you will file. Typically, individuals and married couples can file either Chapter 7 or Chapter 13 bankruptcy. There are some major difference between the two.
If you are considering a Chapter 7 filing, here are some points that you need to know about this type of bankruptcy:
You have to pass a means test to file this form of bankruptcy. This test takes your income into account. The test considers the average of your previous six months of income. If your income is above the allowable amounts, you can't file a Chapter 7 bankruptcy.
This filing also requires that your ability to repay income is considered. This is based on the median income of Illinois if you plan to file here. If your income is over this amount, the court will look at your disposable income to determine if you can repay any of your debts. If you have the ability to do this, you might have to file Chapter 13 so you can enter into a repayment plan.
If you have ever filed for bankruptcy before, this might come into the picture. This is the case if you filed a Chapter 13 within the previous six years or a Chapter 7 within the previous eight years. If either of those apply or if you had a bankruptcy dismissed in the previous 180 days, you won't be able to file Chapter 7.
On top of your eligibility, you also need to determine how your assets will be impacted. For example, Chapter 7 isn't appropriate if you are trying to hang on to your home. Learning about all of these points can help you make an informed decision.
Source: FindLaw, "Who Can File for Chapter 7 Bankruptcy?," accessed Aug. 04, 2017