When obligations to creditors become so massive that making minimum payments proves impossible, a debtor living in Louisiana could consider filing bankruptcy. A potential bankruptcy filer may prefer Chapter 7 liquidation bankruptcy to a Chapter 13 payment plan. However, the debtor might not realize that there are requirements for liquidation bankruptcy.
The requirements for Chapter 7 bankruptcy
The rules and prerequisites associated with Chapter 7 bankruptcy are not open to interpretation. The court and the filer must adhere to federal statutes, and the statutes are quite explicit. For example, anyone intending to file Chapter 7 who previously filed for bankruptcy must wait for a specific amount of years to pass – eight when the previous bankruptcy was Chapter 7 and six when it was Chapter 13.
Chapter 7 also involves passing a means test that examines debts and income. The means test looks at the median standard of income based on the state in which the debtor resides. The means test also examines the ability to cover some payments towards unsecured debts.
Moving forward with the process
Those unable to meet the criteria for Chapter 7 bankruptcy may have other options. Failing the means test or not meeting other requirements might result from present conditions. Retaking the means test in six months might lead to passing the means test and moving forward with liquidation bankruptcy.
Chapter 13 bankruptcy might work for those who cannot file for Chapter 7. Chapter 13 involves agreeing to a payment plan for three or five years. Some unsecured debts, such as credit card obligations, may face a discharge, and the debtor does gain protection from collection actions.