Personal Bankruptcy Laws

The legal standard under personal bankruptcy laws under the federal code.

The Code permits individuals, corporations, and sole proprietorships to file Chapter 7. To qualify for Chapter 13, individuals must additionally earn regular income sufficient to create a realistic probability of reducing debts from disposable income. Corporations are not permitted to file Chapter 13. Personal bankruptcy laws go a step further however for qualifying for Chapter 7. Disposable income is limited to an amount below statutory prescribed maximums collectively know as the net disposable mean test.

Citizenship is not required in all cases, nor is residency within the U.S. or territories. In some circumstances, a U.S. citizen residing in a foreign country may file, as well as foreign residents residing within the U.S. However, property ownership within the U.S. is required for foreign residents as the basis of jurisdiction of the courts. Military service, in any location, is not considered as residing outside of U.S. borders.

Unique restrictions for individuals

The means testing requirement only applies to individuals and income received individually. Appreciation earned and profits retained by corporations owned by an individual are not considered as income. In practice however, the value of stock (liquidation value of proportional ownership percentage) is subject to forfeiture if not covered by applicable exemptions in Chapter 7.