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Is there a Limit to Debt Discharged in Chapter 7?

For some people, Chapter 7 bankruptcy sounds too good to be true. They may be mired in credit card debt or medical bills that are impossible to pay off without any end in sight. Suddenly, they learn that it is possible to discharge this debt entirely and wonder if there is a cap or maximum to the amount they can discharge. Fortunately, there is no limit to the dischargeable debt, assuming the person qualifies for Chapter 7.

This last part is where some people may get tied up. There are certain conditions that need to be met in order to obtain this discharge. The first is that a person will have to pass  the means test, which is a test of a person’s income and assets to ensure they are below the median income level. If a person is above the median, there are certain exemptions that could potentially still qualify them for Chapter 7. A bankruptcy lawyer can examine your particular situation to determine if you pass this test.

Another condition is that a person cannot file Chapter 7 within 8 years of having previously filed. So if you obtained a discharge in 2010, you would not be eligible to file again until 2018 at the earliest.

If you worry that you may not pass the means test or have previously filed Chapter 7, you can still obtain relief using Chapter 13. Under this form of bankruptcy, you will repay creditors according to your income for 3-5 years and then obtain a discharge of unsecured debt once this period ends.

At Westbrook Law Group, we can examine your financial situation to find the option that works best for you. If you have an extreme amount of debt and can’t catch up, speak to a bankruptcy attorney to learn how to break free of this burden. Contact Westbrook Law Group today for a free consultation.