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I heard it's harder to qualify for Chapter 7. Is that true?

You may be struggling financially and overwhelmed by harassing communications from your creditors. You know that filing for Chapter 7 bankruptcy could help you, but you heard it's harder to qualify since the U.S. Bankruptcy code was changed.

First, you should know that just isn't true. Of the many myths about bankruptcy, this one often prevents people from seeking this form of debt relief. You may still qualify for Chapter 7, but the reforms require more paperwork and that you complete the means test.

What is the means test?

The means test determines whether your income and debts qualify you for filing for Chapter 7. It functions as a sort of filter. If your income falls below a certain level, you qualify. If your income falls above the median level for Ohio, you may still qualify if your expenses do not leave you with sufficient money to pay your debts. If you meet the qualifications of the means test, you may file for Chapter 7 -- maybe.

Other factors regarding your ability to file for Chapter 7

Even if you pass the means tests, other factors could preclude you from filing for a Chapter 7 bankruptcy. Those factors include the following:

  • You failed to complete the required credit counseling
  • You attempted to defraud the bankruptcy court or your creditors
  • You received a discharge under Chapter 13 in the last six years
  • You received a discharge under Chapter 7 in the last eight years

If none of these circumstances applies to you, you may file under Chapter 7.

Now what happens?

Once you know that you qualify for Chapter 7 bankruptcy, you must fill out the appropriate paperwork, participate in credit counseling and attend a meeting of creditors. Your creditors may attend this meeting, but in most cases, that doesn't happen. After the trustee has reviewed all of the paperwork you provided, you attended the meeting of creditors and met all of the other requirements of the court and the U.S. bankruptcy code, a decision will be made regarding whether you receive a discharge.

This may sound simple enough, but the paperwork alone can present you with challenges even under the best of circumstances. In addition, you may miss a crucial step or deadline and lose your opportunity to receive a discharge. In order to increase your chances of receiving a fresh financial start, you may want to consult with a bankruptcy attorney.

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