What are the eligibility requirements of Chapter 7 bankruptcy?

An Illinois individual, partnership, corporation or other business entity can file for Chapter 7 bankruptcy, though the only people who qualify for discharge of debts under Chapter 7 are individual debtors. This does not, however, mean that the bankruptcy will discharge all of the individual debtor's debts because some are not eligible for relief under bankruptcy, and any property liens are still enforceable.

Any individual debtor filing for bankruptcy relief under Chapter 7 must complete credit counseling within the 180 days before filing with an approved credit counseling agency. The court will accept both individual and group briefings, but the debtor must file any debt management plan created in counseling with the court. The court may waive this requirement under emergency situations or when insufficient approved agencies exist in the debtor's area that could provide the counseling services.

Individual debtors must also satisfy a "means test" if their current monthly income is above the state median. The court will examine the debtor's income minus allowed expenses for this test, and it cannot exceed $12,475. It must also be under 25 percent of the debtor's unsecured nonpriority debt if that amount is at least $7,025. If the debtor's income does not fit these requirements, the court may convert the case to Chapter 13 unless the debtor can prove special circumstances for additional income adjustments or expenses.

When filing for a personal bankruptcy, an attorney can be a great asset for the debtor. The attorney can help the client complete the paperwork properly to avoid any issues and help ensure that the client satisfies all relevant eligibility requirements.

Source: United States Courts, "Chapter 7 Eligibility", October 15, 2014

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