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There are a huge variety of reasons why people fall behind on mortgage payments, credit card debt and personal loans. Some were granted loans by the bank that weren’t appropriate for their financial situation at the time, making it nearly impossible to meet the obligations long term. Others may have been doing well, but were blindsided by a downsizing at work or an accident that left them with disabilities. Whatever the reason, if they’re completely under water, bankruptcy may be the only option available.

However, the most common form of bankruptcy, Chapter 7, isn’t necessarily available to everyone. The debtor must meet a certain number of criteria in order to file. For Chapter 7, that includes:

  • You must undergo a means test to determine if you do have the capacity to pay back the loans. This may include an audit of your wages, rental income, child or spousal support, workers’ comp, unemployment, disability insurance, interest and any royalties.
  • You can’t have filed for Chapter 7 in the last eight years or Chapter 13 in the last six years. They determine the date from the day you actually filed.
  • Unless you have a disability or are serving overseas, you must go to credit counseling and receive a certificate to give to the court.
  • You can’t have tried to defraud your creditors. This could include giving property to family or friends, destroying property that belongs to the bank or making false statements about your debts or income when applying for credit.

Bankruptcy is a long and complicated process. Having an attorney to walk you through it can be an immense help.