There is a big difference between Chapter 7 bankruptcy and Chapter 13 bankruptcy. In Chapter 7, you do not have the ability to repay any of the debt that you have accrued and it is in very simple terms written off. Chapter 13 sees you as having a certain level of income or assets and you may be able to repay at least part of the debt. In the past, there really were no laws covering who could qualify for Chapter 7 as opposed to 13; it was left up to the judge in charge of your case.
Under the new law of 2005, you have to meet certain criteria in order to file for Chapter 7. The only people allowed to fully qualify under any circumstances are veterans who acquired debt while serving in the military in the operation of a business.
If your income is too high, you may not be able to qualify for Chapter 7. You may be required to enter into bankruptcy under Chapter 13. If your income over the past six months after filing is above the median income for the state of California, you will not be able to file Chapter 7. Types of income included in this are tips, wages, salary and commissions. If you had gross income from a business, rent coming in, interest or dividends from stock or some type of support from a divorce, you need to be open and honest about revealing all of it to the court. Income from Social Security and income tax refunds don't have to be counted.
If you are able to repay some of the debt you incurred because your income meets the threshold of the state's median income, you will have to determine, with the help of the court and your attorney, what part you can pay after the monthly bills are processed and paid.
Doing your research can be empowering. Having help along the way can be informative.
Source: FindLaw, "Who can file for Chapter 7 bankruptcy?," accessed Oct. 20, 2015
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