Many people in Pennsylvania who are considering bankruptcy may want to file for Chapter 7, as most of their debts can be discharged when the action is granted by the court. However, not everyone is eligible to file in this specific category, which also equates to complete liquidation.
In order to be able to file a Chapter 7 bankruptcy, the debtor must first meet the means testing guidelines for their income. Chapter 7 eligibility provides income caps for debtors. For those whose income qualifies after means testing, they may seek relief under Chapter 7 no matter how much debt they owe.
People are unable to file Chapter 7 bankruptcy if they have had a previous bankruptcy case dismissed within the preceding 180 days because of voluntary dismissal, failed to appear in court or failed to comply with the court's orders. People also must have completed an approved credit counseling course within the previous 180 days or they will not be able to file.
Chapter 7 bankruptcy is designed to provide a fresh start to the debtor by discharging unsecured debts. A bankruptcy will not destroy existing liens on property, however. Certain types of debts are also not eligible for discharge in bankruptcy, such as student loans, child support and certain taxes. Chapter 7 provides for liquidation of non-exempt assets in order to satisfy some of the previously owed debts.
People who have questions regarding liquidation and eligibility may benefit from seeking out the advice of a bankruptcy attorney. He or she may be able to provide information about available credit counseling courses, means testing and income eligibility and which bankruptcy chapter is most appropriate in an individual case.
Source: United States Courts, "Liquidation Under the Bankruptcy Code", November 06, 2014