Many people are fully aware that bankruptcy is an effective means of eliminating debt. However, many people fear that they cannot qualify for bankruptcy belief for a variety of reasons. Some people may believe that bankruptcy is only appropriate for people with complex finances. Others may believe that bankruptcy is only appropriate if you have no income whatsoever. In reality, neither of these beliefs are accurate. The simple fact of the matter is that most Pennsylvanians can qualify for at least some form of bankruptcy relief.
When potential clients come to Sadek & Cooper’s Philadelphia bankruptcy lawyers, we often find that people are actually concerned regarding whether they can qualify for Chapter 7 bankruptcy. While many individuals who are considering bankruptcy can indeed qualify for a Chapter 7 filing, there are certain factors that may prevent the individual from receiving bankruptcy relief of any type. Before addressing what is needed to qualify for a Chapter 7 bankruptcy, we will first look at two common reasons why a bankruptcy discharge may not be available.
Factors that May Disqualify Pennsylvanians from Filing for Bankruptcy
The first of the two most common reasons as to why bankruptcy relief may not be available is fraud committed by the individual in a previous bankruptcy or related proceeding. 11 U.S. Code § 523 – Exceptions to discharge – sets forth the various reasons why a court may deny a bankruptcy discharge that an individual would otherwise be entitled to receive. For instance, 11 U.S.C § 523(a)(1)(C) holds that a debtor is not entitled to a discharge for “with respect to which the debtor made a fraudulent return or willfully attempted in any manner to evade or defeat such tax.” Similarly, 11 U.S.C § 523(a)(2)(A) contains an array of exceptions to discharge including most debts obtained by or through, “false pretenses, a false representation, or actual fraud, other than a statement respecting the debtor’s or an insider’s financial condition.
The second common reason why an individual may not qualify for bankruptcy relief is because he or she was previously granted a Chapter 7 or Chapter 13 bankruptcy discharge and sufficient time has not yet elapsed. People who have previously received a Chapter 7 discharge must wait eight years before they can file a second Chapter 7 case. For individuals who previously filed Chapter 7 bankruptcy and received a discharge and wish to file a subsequent Chapter 13 case, a four year waiting period is required. If you previously received a Chapter 13 discharge, you are not permitted to receive a second discharge in any Chapter 13 proceeding filed within two years from the date of the original filing. Absent certain limited circumstance, an individual who has received a Chapter 13 discharge must wait until six years has elapsed to obtain a subsequent Chapter 7 bankruptcy discharge.
Many People Can Qualify for Chapter 7 Bankruptcy in Pennsylvania
As one can probably surmise from the above, most people can qualify for at least some form of bankruptcy. However for individuals who would like to file for Chapter 7 Bankruptcy and whose situation is a good fit for a Chapter 7 filing, the biggest hurdle to qualifying is Chapter 7 means test.
Under the Chapter 7 means test, the individual’s income is compared to the median of the area. If the individual’s income falls below the applicable median income, the individual qualifies for Chapter 7 bankruptcy. If the potential bankruptcy filer’s income is equal or greater than the state minimum, a subsequent analysis of the individual’s “disposable income” is conducted. Even if a potential bankruptcy filer cannot qualify for Chapter 7, he or she can often get relief through Chapter 13 bankruptcy. In fact, certain financial circumstances, such as when you hold significant secured debt or wish to protect significant property and assets, may be better handled under Chapter 13 of the U.S. Bankruptcy Code.
Work with a Strategic Philadelphia Bankruptcy Attorney
A difficult financial situation and a potential bankruptcy can be intimidating. However, filing for Chapter 7 or Chapter 13 bankruptcy is often one of the most effective means of handling debt and getting a fresh financial start. The Bucks County bankruptcy attorneys of Sadek & Cooper can guide you through the entire process and take your uncertainty and anxiety out of the equation. To schedule a free and confidential consultation at one of our Philadelphia or Pennsylvania law offices, call us at 215-545-0008 or online today.