Until a few years back, the eligibility of an individual for filing a bankruptcy petition under chapter 7 was determined solely by the judge of the U.S. Bankruptcy Court. As a result, there were hundreds of filers who got their debt discharged under chapter 7, even when they were quite capable of repaying it through chapter 13. In order to filter out such fraudulent filers, a new law was developed that stipulated Chapter 7 eligibility criteria.
Chapter 7 Eligibility Criteria
- If you earn enough income to repay your debts under chapter 13, you will not be allowed to file for a chapter 7. For this, your current monthly income will be measured against the median income of a similar-sized family in your state. In case your income is less than or equal to the median, you will be considered eligible for the chapter 7. However, if your income is higher than the median, you will be required to take ‘the means test’ to determine your eligibility for the petition.
- If you have discharged a previous debt by means of a chapter 7 bankruptcy within the last eight years or through chapter 13 in the last six years, you are automatically disqualified for filing another chapter 7 until the required time span has elapsed.
- If the US bankruptcy Court finds out that you have defrauded your creditors and concealed your assets with wrong intentions, your chapter 7 case would be immediately dismissed.
Also, while filing for a chapter 7, you are required to undertake a ‘penalty of perjury’ oath for the authenticity of information furnished by you. So, in case a fraudulent action is discovered by the court, you might even be prosecuted for fraud.