The bankruptcy process is full of rules and requirements that are meant to protect both the consumer and the system from abuse or fraudulent filings. The nature of the process can often confuse and overwhelm people when they begin considering filing. Getting to know a little bit about how the process works is the best way to initiate your trip to financial freedom.

Do You Qualify?

A misconception about the bankruptcy process is that anyone can file, at anytime, anywhere. This is false. While the bankruptcy process is very accessible for most people, there are requirements that must be met in order to qualify.

The first roadblock in your eligibility for bankruptcy is your debt and income level. Anyone filing for bankruptcy is assessed by given a means test. This test evaluates your income level against the median income level of your state of residence. If your income is less than the median income level, you are automatically eligible to file for Chapter 7 bankruptcy. If your income exceeds the median income level, your total debt burden and number of dependents are taken into consideration as well. At this point, your income level could allow you to be eligible for Chapter 7. However, if your disposable income is deemed sufficient enough for repayment then you will be eligible for Chapter 13 instead.

A point to consider that is often left out of the equation is where to file your case. You cannot just file for bankruptcy in any court, but your states district court of where you reside. The general rule is that you are to file your bankruptcy petition in the court of the district where you have lived for the 180 days prior to the filing. If you have not lived in your current residence for 180 days or more, or have the majority of your assets located in another district, you may file in that other district's court. The other point to remember about the residency requirement in bankruptcy is that some states require you to have lived in your current residence for at least two years in order to claim the exemptions of your state, otherwise you may only be able to claim protection of assets under the federal bankruptcy exemption laws.

Another potential road block in filing for bankruptcy is based on your prior experience with the bankruptcy process, if any. If you have had debts discharged in bankruptcy in the past you may be required to wait a specific period of time before becoming eligible again. For example, if your had debts discharged in a previous Chapter 7 filing you will have to wait at least eight years before being eligible to file another Chapter 7 case, or at least six years to file a Chapter 13 case. If your debts were discharged in a prior Chapter 13 case you will have to wait at least four years to file for Chapter 7, or two years to file for another Chapter 13 case.