Chapter 7 bankruptcy is a debt liquidation proceeding which allows a debtor to eliminate most of his unsecured debt. Any individual residing, domiciled, or having business property in the U.S. may file a Chapter 7 bankruptcy case. Businesses may also file Chapter 7 bankruptcy.
Chapter 7 Bankruptcy Eligibility
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If you are facing heavy unsecured debts and are considering filing for Chapter 7 bankruptcy, you probably have questions about whether or not you are eligible to file. This can be particularly confusing if you are not familiar with the updates to the US bankruptcy code implemented by 2005’s Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCA).
While it may not be right for everyone, successfully filing for Chapter 7 bankruptcy may be your best option for eliminating your debts and moving on with your life.
Am I Eligible?
Bankruptcy law may be very confusing to the uninitiated, and you may have questions concerning your eligibility to file for Chapter 7 bankruptcy. The requirements are:
- You must have undergone credit counseling, either for individuals or for groups, within the last 180 days.
- You have not had a filing dismissed in the last 180 days because of your failure to appear in court.
- If you make over the median income for your state, you will undergo a “means test,” to ensure that you are not abusing the bankruptcy system. An experienced bankruptcy attorney may be able to help you with this test. If you fail the means test, you may be limited to filing under Chapter 13 bankruptcy.
If you meet these criteria, you may be a candidate to file for Chapter 7 bankruptcy, which can help discharge your debts and reclaim your life.
In addition to meeting the residency requirements, individuals must also pass the median income or means test in order to file a Chapter 7 bankruptcy. The median income test requires a debtor to show that the income for his household is less than or equal to the median income for a household of the same size in his state. If a debtor satisfies the median income test, he is eligible to file a Chapter 7 bankruptcy case. If a debtor does not pass the median income test, he must pass the means test to be eligible to file a Chapter 7 bankruptcy case.
The means test is used to determine whether the filing of a Chapter 7 bankruptcy case amounts to an abuse of the bankruptcy process. If a debtor has at least net monthly income of $166.67 or $10,000 projected over a period of five years available for payment to general unsecured creditors, abuse is assumed. On the other hand, if a debtor has less than $100.00 or $6000 projected over a period of five years available for payment to general unsecured creditors, abuse is never presumed. If a debtor falls between these two extremes, abuse is presumed only if the debtor has projected net monthly income sufficient to pay at least 25% of general unsecured debts over a five year period. If a debtor cannot pass the means test, he must file a Chapter 13 bankruptcy.
The means test utilizes a number of complex formulas to determine whether a Chapter 7 bankruptcy filing amounts to abuse. Therefore, the experienced bankruptcy attorneys at the a Professional Law Group use cutting edge technology to review and process our clients’ income and other financial information to determine whether they are eligible to file a Chapter 7 bankruptcy.
Benefits of Chapter 7 Bankruptcy
While Chapter 7 Bankruptcy is often referred to as liquidation bankruptcy, fewer than one half of 1% of cases end in the loss of property. We are dedicated to helping our clients get exemptions that allow them to keep their property. We tirelessly work to give our clients the peace of mind they deserve.
If you find yourself facing heavy levels of debt and are unsure of what to do to get the relief you need, we may be able to help. Compassionate Chapter 7 attorneys may be able to work with you and your family to protect your home, your vehicles, and your other possessions.
Overcoming Your Debts
We are dedicated to helping our clients take advantage of the many benefits of a successful Chapter 7 filing. Some of the biggest benefits include:
- The elimination of unsecured debts, such as credit card debt, medical bills, many personal loans, and more.
- A filing helps you rebuild your credit score over time, allowing you to take out larger loans, such as auto and home loans.
- Exemptions allow you to keep your property. An experienced attorney can work with you to get exemptions for your home, your primary vehicle, life insurance policies, jewelry, tools, public benefits, and damages awards.
Chapter 7 does not have to mean liquidating your assets. With the help of an experienced Chapter 7 attorney, you may be able to protect the possessions most important to you.
Dischargeable Debts
When you are considering filing for Chapter 7 bankruptcy, one of the foremost concerns in your mind is almost certainly which debts are dischargeable and which are not. A debt that has been discharged is a debt for which you are no longer responsible. Your dischargeable debts can greatly reduce the overall amount of debt for which you are held accountable.
List of Dischargeable Debts
Under current Chapter 7 bankruptcy law, the following items are dischargeable:
- Debts related to your business
- Leases
- Personal loans
- Judgments against you, such as accident claims
- Negligence claims
- Deficiencies related to vehicle repossessions
- Credit card balances
Additionally, the following debts may be considered dischargeable, unless a creditor can prove to a bankruptcy court that they are not:
- Settlements and obligations related to a divorce
- Debts caused by your breach of fiduciary duty
- Debts related to fraud
- Debts caused by the dishonesty of others
- Debts resulting from the malicious injury of others
Knowing which debts you can be held accountable for and which you cannot is very important in determining if Chapter 7 is right for you.
Non-Dischargeable Debts
Under Chapter 7 bankruptcy law, there are two types of debts: those that are dischargeable, and those that are not. Once a debt has been discharged, you are no longer responsible for it. This means that discharged debts can no longer be held against you, and creditors are no longer able to try to collect these debt from you. Knowing which debts can be discharged and which cannot is vitally important to you when you are determining if filing for Chapter 7 bankruptcy is right for you.
Bankruptcy attorneys understand the confusion and fear that goes along with heavy debts. We may be able to work with you to help you overcome these concerns, discharge your debts, and get your life back in order.
List of Non-Dischargeable Debts
The following debts are considered non-dischargeable under current law. You may still be held accountable for these debts following your bankruptcy filing:
- Unpaid taxes and tax liens
- Student loans
- Spousal support
- Child support
- Debts acquired through fraud or false representation
- Debts related to willful and malicious injury
- Debts owed to the government
- Debts related to lawsuits stemming from accidents you committed while intoxicated
- Certain condominium and cooperative collective fees and costs
These debts cannot be discharged through a Chapter 7 filing. If you are dealing with the burden of these debts, you may consider looking into other options.
The Filing Process
Every Chapter 7 bankruptcy debtor must complete a pre-bankruptcy counseling class within the 180 day period prior to filing. The certificate of completion for the class must be filed with the bankruptcy court along with the bankruptcy petition and schedules. Additionally, Chapter 7 bankruptcy debtors must file pay stubs and payment advices for the 60 day period immediately before the bankruptcy petition is filed. Chapter 7 bankruptcy debtors must also provide the bankruptcy trustee with a copy of their most recent tax return at least 7 days before the Meeting of Creditors.
A Chapter 7 bankruptcy debtor must pay the filing fee of $306. Chapter 7 bankruptcy debtors may request permission to pay the filing fee in installments by filing an Application to Pay Filing Fee in Installments at the time that the bankruptcy petition is filed. If the application is granted, the debtor must pay the filing in full within 120 days of filing bankruptcy and in no more than four installments.
The Meeting of Creditors
The Meeting of Creditors takes place about 30 days after the bankruptcy petition. The debtor’s attendance at the Meeting of Creditors is mandatory. During the Meeting of Creditors, the debtor gives sworn testimony regarding the contents of his bankruptcy petition, including his income, assets, and debts. The Meeting of Creditors is conducted by the bankruptcy trustee; however, creditors have the option of attending and may question the debtor.
The Treatment of Unsecured Debts in Chapter 7 Bankruptcy
In most Chapter 7 bankruptcy cases, after the Meeting of Creditors, the bankruptcy trustee will file a report with the bankruptcy court whereby he abandoning his interest in the bankruptcy estate. Within about 90 days of the date the petition was filed, a Chapter 7 bankruptcy debtor will receive a discharge. All unsecured debts except for domestic support obligations, certain taxes, and student loans will be discharged.
Treatment of Secured Debts in Chapter 7 Bankruptcy
In a Chapter 7 bankruptcy case, a debtor with secured debts must specify in his bankruptcy petition his intentions with regard to the property securing those debts. A debtor may either redeem, reaffirm, or surrender such property.
How the Attorney’s at Bankruptcy Professionals Can Help You
At the Bankruptcy Professionals, we are committed to helping our clients resolve their financial issues and get the fresh start they deserve. Our bankruptcy attorneys know that every case is different. Therefore, we work closely with each client, taking into consideration their special needs, circumstances, and goals. Not only will we prepare you bankruptcy petition in accordance with the Bankruptcy Code and local rules, we will represent you throughout the process to ensure that you will receive a discharge.