The Criteria For The Filing of Bankruptcy Petitions

Written by Adam Peck Category: Nursing Homes January 17th, 2013 3 min read

The U.S. Code limits who may file for Chapter 7 bankruptcy based on several different criteria. For a general discharge, any individual qualifies who maintains legal residency. In addition, all U.S. citizens may request relief regardless of their current country of residency. Further, foreign citizens may also request relief when either owning or operating a business within U.S. territories says Los Angeles Bankruptcy Attorney Steven C. Peck.

Unique filing restrictions also apply to Chapter 13. Debtors who propose a repayment plan must currently earn a regular income. Salaries or profits from the operation of a business satisfy the requirement. Both individuals and corporations may propose plans and request relief from the court. A debtor who does not produce regular income is not qualified.

After establishing basic qualification, the means test imposes a more difficult requirement that applies in all chapters. Nevertheless, the application of the test is limited to individuals. Originally, lawmakers designed the test with the intent of restricting who may file for Chapter 7 bankruptcy. In practice however, the rate at which individuals choose a general discharge recently increased dramatically.

How the Means Test Restricts Who May File for Chapter 7 Bankruptcy
The amount of a debtor’s net disposable income, after paying for basic living expenses, determines who may file for Chapter 7 bankruptcy. The calculation of net income relies on slightly different components than used in traditional accounting practices. The means test requires debtors to use average income and expenses over the last full six months immediately before filing. indicates California Bankruptcy Lawyer Steven C. Peck.

Total income is easy to ascertain because the test uses actual income received. The test then adopts a variety of allowable expense deductions. Basic living expenses include allowances based on the average cost of necessities. The test also includes the amount of payments due on outstanding debts and extraordinary expense actually paid for a few categories.

Debtors earning more than $200 net income per month do not fit within restrictions on who may file Chapter 7 bankruptcy. The test further provides two additional exceptions for qualification. Debtors that owe an exceptionally high amount of consumer debt may potentially qualify using two different formulas.

The Chapter 7 Qualification Standard
The amount of net disposable income available to creditors sets the qualification standard for who may file Chapter 7 bankruptcy. Lawmakers restrict access to a general discharge because of perceived abuse. Despite these restrictions, the total number of Chapter 7 cases filed during the first quarter of 2009 rose by 46.3 percent according to U.S. Court administrators. Contact California Bankruptcy Attorney Steven C. Peck toll free at 1.866.999.9085 to discuss your bankruptcy options.

Share it

Questions? Check with Peck Today

Blog Lead Form

Elder Abuse and Neglect in Assisted Living Facilities

Elopement in Nursing Homes

Assisted Living Abuse

Settlement Reached in Assisted Living Facility Death

Assisted Living Abuse and Neglect Attorneys

Written by Adam Peck

Expertise: Personal Injury

Adam J. Peck, ESQ is a principal with Peck Law Group, APC. In 2008, Mr. Adam Peck received his Juris Doctorate from Whittier Law School where he graduated Cum Laude. His practice is primarily dedicated to representing Elders, Dependent Adults, along with their loved ones and family members, who have suffered horrific personal injuries.