What are the Chapter 7 Bankruptcy Rules?

N. Madison

Chapter 7 bankruptcy rules govern who can apply for this type of bankruptcy and when they can apply. For example, rules stipulate that a person who files this type of bankruptcy must demonstrate that he does not have enough money to pay his debts. Additionally, he cannot have a discharged bankruptcy that is less than eight years old. Likewise, an individual who had a bankruptcy case dismissed in the previous 180 days for reasons such as court order violations or fraud is not eligible for a Chapter 7 bankruptcy.

People who file for Chapter 7 bankruptcy must demonstrate their inability to pay their debts.
People who file for Chapter 7 bankruptcy must demonstrate their inability to pay their debts.

One of the most important Chapter 7 rules governs who can apply for this type of bankruptcy. Individuals are usually eligible for this type of bankruptcy discharge, but partnerships and corporations are not. This does not mean that they cannot file bankruptcy, however, as there are other types of bankruptcy that are available for partnerships and corporations.

Inability to repay debt is one requirement for filing Chapter 7 bankruptcy.
Inability to repay debt is one requirement for filing Chapter 7 bankruptcy.

The amount of money the individual owes is not usually a factor in whether or not he is eligible for bankruptcy, but some types of debts may not be eligible for discharge. For example, many types of students loans are not eligible for Chapter 7 discharge. Chapter 7 bankruptcy rules usually exclude child support as a dischargeable debt as well.

There are also Chapter 7 bankruptcy rules that involve the ability of an individual to repay his debt. To be eligible for this type of bankruptcy, an individual’s income cannot exceed the median income in his state. In the event that a person’s income is too high, he may still have the right to file this type of bankruptcy if he does not have enough disposable income to create a reasonable five-year repayment plan for a significant amount of his debt.

Some Chapter 7 bankruptcy rules involve the previous filing of bankruptcy. Usually, an individual is not eligible for this type of bankruptcy if fewer than eight years have passed since he received a Chapter 7 bankruptcy or fewer than six years have passed following a Chapter 13 bankruptcy. Likewise, if a person had a bankruptcy case dismissed in the last 180 days because he violated a court order, he is not eligible for this type of discharge. The same holds true if an individual committed fraud or an abuse of bankruptcy law.

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