Bankruptcy Information for Chapter 7 Filers

An essential component of any viable and successful bankruptcy filing is the bankruptcy information a consumer obtains prior to filing, which is ultimately used in creating an overall bankruptcy plan. Assuming a consumer has gathered sufficient bankruptcy information from credit counseling agencies, legal counsel, and other credible entities involved in the debt relief field when electing to file Chapter 7, as opposed to most likely Chapter 13, a number of items still will likely need to be addressed by the consumer.

Eligibility Requirements for Chapter 7

Not everyone is eligible to file for protection under Chapter 7. Per the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, the following eligibility requirements are in place for Chapter 7 filers, including:

• Debtors must meet means test. In short, only debtors whose monthly income stands at less than the median income of their state of residence will be eligible automatically, or under the safe harbor means test figure. Individuals or joint filers exceeding the median income of their state must undergo a means test to determine eligibility.

• Definitions of current monthly income state the average income of the debtor in the six months prior to filing, with certain income payments excluded from these calculations. Likewise, the median state income figure is subject to interpretation per the bankruptcy code. Furthermore, the calculations for eligibility under safe harbor income figures also include family size as well. Having a bankruptcy lawyer involved in these calculations is important.

• Debtors exceeding the median income of their state of residence will undergo a means test, which essentially is a complex process of determining available income in light of a complex set of calculations, deductions, exemptions, and exclusions. Again, having legal counsel is essential towards obtaining a favorable outcome in this process.

• All bankruptcy cases are subject to both state and federal law. Determining one’s state of residence may become an issue in certain bankruptcy cases, especially Chapter 7 cases involving favorable exemption lists.

• Waiting periods exist between Chapter 7 filings, currently mandating a wait period of at least eight (8) years between filings.

• Debtors are also required, by law, to undergo credit counseling with a government-approved credit-counseling agency prior to filing Chapter 7. Documenting meeting these requirements is essential.

Getting Legal Help with Understanding Chapter 7 Bankruptcy

The aforementioned items only cover the major eligibility requirements for filing Chapter 7; however, debtors must also focus on the implications of filing Chapter 7 as well. Beforehand, a debtor can determine specifically which of his or her debts will be discharged, as well as what assets will be subject to liquidation. Having legal counsel make these determinations accurately, as well as assist with the filing process, is essential. For more information and insight, consult with a bankruptcy lawyer today.