Law & Legal & Attorney Bankruptcy & consumer credit

Type 7 Bankruptcy Requirements

    Eligibility

    • Chapter 7 bankruptcies are designed to be used by a limited group of people. Debters can only file as individuals or as a family unit. This form of bankruptcy is not available to partnerships or corporations.

    Bankruptcy History

    • If you are considering filing a Chapter 7 bankruptcy be aware any prior bankruptcy history will be considered by the bankruptcy courts. You cannot file if you have had a bankruptcy petition dismissed in the preceding 180 days. You also will not be allowed to file if you have not received credit counseling from an approved credit counseling agency within 180 days of the date you submit the bankruptcy proposal.

    Monthly Income

    • Chapter 7 filing mandates a means test. This test will automatically be considered meeting the requirement if your current monthly income is less than your home state's median income for your family size. The monthly income is determined utilizing a worksheet provided by the courts. If your income is more than the median the test will be applied to determine eligibility. The U.S. Trustee's Office's website lists up-to-date state by state median incomes.

    Means Test

    • The second requirement for the Chapter 7 means test takes effect when a debtor's income exceeds the state median. This section allows debtors to deduct certain expenses from their monthly income. The allowable expenses are based on IRS standards. The remaining amount constitutes disposable income. The amount of disposable income is then multiplied by 60 (disposable income over five years). If this is less than $6,000.00, the debtor is eligible for Chapter 7. If the total is more than $10,000, the debtor is not eligible. If it falls between these two standards, the number is measured against the amount of the debtor's non-priority, unsecured debts (such as store cards, unsecured personal loans and credit cards). If the amount of the five-year-projected monthly disposable income is less than 25 percent of the total of the unsecured debts, the debtor is eligible to file this type of bankruptcy.

    Fees and Suggestions

    • Eligible debtors must pay a filing fee. This fee is around $300.00 depending on the state. Debtors may choose to be represented by legal counsel. Many attorneys offer a free initial evaluation.

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