Filing for Chapter 7 bankruptcy may be the best option for individuals or business entities in Arkansas that find themselves overwhelmed by the amount of their debts. However, it is important to research the eligibility requirements for a Chapter 7 filing before beginning the process.
In order to qualify for Chapter 7, the filer must either be an individual or some form of business entity such as a corporation. In addition, individual debtors may be subject to a means test conducted in accordance with the Bankruptcy Code if their monthly income is greater than the state median income. There is a presumption of abuse if a debtor’s monthly income for a period of five years is greater than $12,475 or 25 percent of the unsecured debt, but certain extenuating circumstances can make it possible for a debtor to mitigate this presumption.
Some circumstances can also render a debtor ineligible for Chapter 7. For example, an individual seeking Chapter 7 relief is required to undergo credit counseling. If he or she has not done so within 180 days of filing, they may not be permitted to proceed. Similarly, individuals will not be permitted to file if within the preceding 180 days they willfully failed to comply with court orders or had another bankruptcy petition dismissed.
Since the laws for determining eligibility can be somewhat complicated and specific to the individual circumstances of the debtor, someone considering Chapter 7 may wish to secure legal representation before beginning the process. An attorney may be able to assist in preparing the necessary documentation and offer counsel with respect to eligibility requirements.
Source: United States Courts. , “How Chapter 7 Works“, October 13, 2014