Ask Bankruptcy Attorney in Sacramento, Stockton, Fairfield, CA – Who is Eligible to File for Chapter 7 Bankruptcy?

Only a person that resides or has a domicile, a place of business, or property in the United States, or a municipality, may be a debtor under the Bankruptcy Code. 11 U.S.C. § 109(a).  However, this is insufficient to qualify for each Chapter of Bankruptcy.

Eligibility for Voluntary Chapter 7 Bankruptcy filing:

Under Voluntary Chapter 7 Bankruptcy, the "person" who is eligible are anyone except for railroads, insurance, banking institutions.

If the person in question is an individual consumer debtor (aka individual with primarily consumer debts), she must pass the Means Test, which can be a lengthy calculation involving income and expenses to determine qualification.  Consumer debt is defined as debt incurred primarily for personal, family or household purpose.  11 U.S.C. § 101(8).  Because Chapter 7 Bankruptcy does not involve repayment of your debt, your disposable income (gross income deducting for taxes (crediting tax refunds) and necessary and reasonable expenses) must be below a certain point.  Certain income like social security benefits or social security disability are excluded from the Means Test.

If a majority of the debt is business debt, then you can forgo the Means Test but must fill out the form.  However, your case must be filed in "good faith".  Your bankruptcy case is subject to the "good faith" test.

Even if the person is an individual consumer debtor, she may be able to forego the Means Test if she is a "Disabled Veterans" as defined in 38 U.S.C. § 3741(1) and her debt was incurred during "active duty" as defined in 10 U.S.C. § 101(d)(1) or performing a "homeland defense activity" as defined in 32 U.S.C. § 901(1).  Again, your case must be filed in "good faith".

In another Sacramento Bankruptcy Attorney Blog, I will discuss Eligibility for Discharge under Chapter 7 Bankruptcy.  Just because you are eligible to file for Chapter 7 Bankruptcy does not necessarily follow that you will receive a discharge under Chapter 7 Bankruptcy. 

For more information about eligibility for voluntary Chapter 7 Bankruptcy filing and discharge call Muoi Chea, experienced Sacramento Bankruptcy Attorney serving Sacramento, Stockton and Fairfield, CA, and surrounding cities like Tracy, Modesto, Vacaville, Vallejo, Elk Grove, Citrus Heights, Carmichael, Fair Oaks, Davis, Roseville, and Benicia, California.