According to FindLaw, up until late 2005 bankruptcy judges could use their discretion to decide whether a debtor qualified for Chapter 7 bankruptcy. As a result, the majority of bankruptcy filers chose to file for Chapter 7 even if they were fully capable of repaying their debt under a Chapter 13 repayment plan. To weed out filers who can afford to repay some debt, all states, Tennessee included, have adopted filing criteria for Chapter 7.
First and foremost, to qualify for Chapter 7, you must meet the income criteria. If your income is equal to or below the state’s median, you may be eligible for Chapter 7 bankruptcy. However, if your income is above Tennessee’s median family income, you must prove you meet additional eligibility standards.
If you do not meet the income standards, the bankruptcy courts may still approve you for Chapter 7 if you have insignificant disposable income. “Disposable income” is income you have left over after paying standard monthly expenses such as rent, gas, food and the like. If you have enough disposable income to repay a portion of your debt, you may not qualify for Chapter 7.
If you have not recently received a discharge via Chapter 7 within the past eight years or under a Chapter 13 within the past six years, you may qualify for a Chapter 7 bankruptcy. However, if the bankruptcy courts dismissed a Chapter 13 or Chapter 7 case within the past 180 days, you may be ineligible.
Finally, if you are willing and able to complete credit counseling via a U.S. Trustee’s office-approved agency, you may be eligible for Chapter 7. The federal government requires participation unless an exception applies.
This article is for informational purposes only. It should not be used as legal advice.