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As many Kansas City residents may know, it is all too easy for debt to creep up on a person. A mortgage, a car loan and multiple credit cards may be manageable until the unexpected happens. When faced with a disastrous event that potentially drains their pocketbooks, leaving them unable to pay their monthly bills, a debtor’s financial situation can become particularly dire. What are their options when faced with overwhelming debt? One option is filing for Chapter 7 bankruptcy. Yet is every debtor eligible to file for Chapter 7?

While the following information is not a substitute for the advice of a bankruptcy attorney, there are certain qualifications that must be met to file for Chapter 7. Individuals will be subject to a means test, which basically ensures that the debtor does not make so much income compared to their debts as to abuse the bankruptcy system. If the debtor passes the means test, they may apply for Chapter 7 bankruptcy, no matter how high their debts are and whether they are insolvent or solvent.

However, a person will not be eligible for Chapter 7 relief if, within the past 180 days, a previous petition for bankruptcy was dismissed because the debtor failed to show up to court or adhere to court orders, or the debtor chose to dismiss the case.

In addition, debtors have to complete a credit counseling course within 180 days prior to filing for bankruptcy. Any debt repayment plans crafted in the credit counseling process need to be filed with the debtor’s area bankruptcy court.

Chapter 7 bankruptcy gives debtors the means to overcome their debt. Many of their old debts will be discharged, leaving them with a clean slate. That being said, it is important to remember that Chapter 7 bankruptcy cannot discharge all types of debts, nor can it get rid of an existing lien on a piece of property. Even so, it is a powerful tool debtors have at their disposal to deal with their financial woes.

Source: United States Courts, “Liquidation Under the Bankruptcy Code,” accessed Feb. 9, 2015