What are the qualification requirements for Chapter 7 bankruptcy?
The qualification requirements for Chapter 7 vary based on whether the debtor is an individual or a business.
People who file Chapter 7 have their own set of requirements which include:
- Must have filed taxes for the 4 year period preceding the filing of the bankruptcy if required to.
- Must be under the median income limit unless a majority of your debt is business related.
- After deducting for living expenses, the debtor cannot have excessive income left over sufficient to pay a chapter 13 bankruptcy note.
- Must not have received a discharge in a Chapter 7 filed within 8 years of the subsequent Chapter 7.
- Must not have received a discharge in a Chapter 13 filed within six years of the filing of a subsequent Chapter 7.
- Must not be under a 180 day prohibition from the dismissal of a previous case.
A business can file for bankruptcy—and sometimes it makes sense to do so (but not usually). Chapter 7 bankruptcy will not wipe out the debt of a corporation or LLC, however. Instead, the trustee will liquidate the company assets and distribute the funds to creditors. This can be an effective way to wind down a business.
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