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How Do You Qualify for Chapter 7 Bankruptcy?
Filing for Chapter 7 bankruptcy offers a fresh financial start to individuals or married couples overwhelmed by debt. This process eliminates most credit card and unsecured debts, while allowing you to keep secured debts (like a mortgage or car loan) if you continue payments.
Contrary to common myths, bankruptcy does not leave you with 7–10 years of bad credit. Many clients rebuild credit within two years, receive new credit card offers shortly after discharge, and even qualify for a mortgage again in two to three years.
The Three Main Qualification Factors
1. Average to Below Average Income
To qualify, most households must have average to below average income for their household size. Mississippi median income levels are used as a baseline, but expenses and paycheck deductions are also considered. Even those earning above median may qualify if their necessary living costs reduce disposable income.
2. Debt Beyond What You Can Afford
There is no minimum or maximum debt required to file. The key question is whether your current debt prevents you from maintaining a reasonable standard of living. A smaller debt may be overwhelming for a lower-income household, while larger debts may be manageable for higher-income earners.
3. No Substantial Assets
Filing Chapter 7 does not mean losing everything. Bankruptcy law protects most essentials, including cars, homes, household goods, retirement accounts, and tax returns, up to specific values. In most cases, filers are able to keep nearly all of their assets.