Chapter 7 Bankruptcy: Who Can File?
August 23, 2009
Use the questions below to determine whether you are eligible to file Chapter 7 Bankruptcy. If you need help with these questions, please feel free to call our office for a free phone consultation.
Question One:Â Are you Eligible under the Income Guidelines?
Question Two:Â Have You Previously Received a Bankruptcy Discharge?
Question Four:Â Have You Accumulated Debts in Anticipation of Filing or Concealed Assets?
Question Five:Â Have you Taken the Required Credit Counseling Course?
Question Six:Â Are you Current on all Tax Filings?
Question Seven:Â Have you Gathered Your Documents?
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Question One:Â Are you Eligible under the Income Guidelines?
A. Skip this step if you are:
A disabled veteran whose debts were incurred during active duty.
Your debts are primarily from the operation of a business.
B. Median Income and The Means Test
(1) Determine whether your “Current monthly income” is higher than median income for a family of your size in your state.
Your “current monthly income” is your average monthly household income over the last six months before you file.
Find the figures to use for your state’s median income at this link.
If your income is less than or equal to the median income for a family of your size in your state, you are presumed to be eligible to file Chapter 7 bankruptcy. But, see below for the “totality of the circumstances” test.
If your income is more than the median, you must proceed to the next step…the “Means Test.”
(2) If Necessary, Take the Full Means Test
If your average monthly income for the six-month period prior to filing is higher than the median income for a family of your size in your state, you need to take the “full” means test to determine if you are eligible to file Chapter 7 bankruptcy.
While there are many means test calculators available on the internet, many of them are not reliable. If you need to take the means test, our office will do this calculation for you as part of your initial consultation.
(3) “Totality of the Circumstances” Test
Even if your income is below the median for a family of your size in your state, your filing will still be scrutinized by the Trustee under the “totality of the circumstances” test.
What does this mean? If, for example, you seem to have lots of income left over after paying your monthly bills, the Trustee could theoretically throw out your Chapter 7 bankruptcy for being abusive.
Consequently, it is very important to be sure you disclose ALL expenses when you complete the financial information associated with your bankruptcy filing.
Sometimes people are embarrassed of high expenses and will try to minimize them when filling out forms or disclosing this information to their attorney. This is a mistake for the reasons noted above.
Question Two:Â Have You Previously Received a Bankruptcy Discharge?
Chapter 7 Discharge: You may not file a Chapter 7 bankruptcy case if you received a Chapter 7 bankruptcy discharge within the past EIGHT years.
The dates are calculated from filing date to filing date.
Example: if you filed your previous Chapter 7 bankruptcy on August 1, 2001 and received your discharge on February 1, 2002, you are eligible to file another Chapter 7 bankruptcy on August 1, 2009.
Chapter 13 Discharge: You may not file a Chapter 7 bankruptcy case if you received a Chapter 13 bankruptcy discharge within the past SIX years (again calculated filing-date-to-filing-date.)
You are not eligible to file for Chapter 7 bankruptcy if a previous Chapter 7 or Chapter 13 case was dismissed within the past 180 days because (1) you violated an order of the Bankruptcy Court, (2) the court found the previous filing fraudulent or abusive, or (3) you requested dismissal after a creditor asked for relief from the automatic stay.
Question Four:Â Have You Accumulated Debts in Anticipation of Filing or Concealed Assets?
If you have run up debts in anticipation of filing bankruptcy and / or concealed assets, you will not be eligible to file bankruptcy.
The following are examples of transactions that can render you ineligible to file and / or to discharge your debts in bankruptcy:
Making false statements about your income or debts on a credit application,
Changing the way title is held to your house, car, or bank accounts,
Giving or selling assets to your friends or relatives to hide them,
Running up debts for luxury items when you had no way to repay, or
Concealing property or money from your spouse during a divorce proceeding.
Question Five:Â Have you Taken the Required Credit Counseling Course?
Before you file for Chapter 7 Bankruptcy, you must take a Credit Counseling Debt Education course approved by the Office of the U.S Trustee.
You can take the class online or over the phone. There are many Trustee-approved vendors.
See the U.S. Trustee website at this link to find a list of approved vendors.
Question Six:Â Are you Current on all Tax Filings?
Your bankruptcy attorney will need to review tax returns from at least the past two years. Additionally, you must be current on all tax returns in order to qualify for bankruptcy relief.
Question Seven:Â Have you Gathered Your Documents?
If you need help with any of the above questions, please call our office for a free bankruptcy phone consultation.
Recent Testimony: Bankruptcy Mortgage Modification Necessary to Enhance HAMP’s Effectiveness
July 29, 2009
On July 9, the House Judiciary Committee’s Subcommittee on Commercial and Administrative Law heard testimony on the effectiveness of voluntary mortgage modification efforts, including the Obama Administration’s Home Affordability Modification Program (HAMP). “Effectiveness” was defined as preventing foreclosures.
Irwin Trauss, of Philadelphia Legal Assistance, testified on behalf of NACBA (The National Association of Consumer Bankruptcy Attorneys.)
Trauss is overall supervisor of the Save Your Home Philly Hotline, which has handled over 10,000 calls from homeowners facing foreclosure. He is also one of the creators of the Philadelphia Court of Common Pleas Foreclosure Diversion Program.
In his testimony, Trauss gave numerous examples of servicers ignoring the requirements of HAMP. Servicers sometimes told homeowners they were not eligible to apply, and often denied applications for reasons that did not comply with the program guidelines.
He also described the program’s failure to help many large sub-groups of homeowners.
Trauss concluded his testimony by stating that “absent significant leverage on the part of homeowners to force a change in behavior, the majority of servicers will continue to find ways to avoid meaningful modifications despite HAMP.
“The only way to change their behavior to the extent required to make meaningful modifications common is to provide the homeowner with leverage over the servicer, such as the threat of a bankruptcy judge imposing a modification.
“The availability of such an option for homeowners would likely complement voluntary programs such as HAMP and the Diversion Program and substantially increase the chances that meaningful long lasting modifications will result.”
The above post was partially excerpted from a National Association of Consumer Bankruptcy Attorneys (NACBA) email alert.
NACBA is a national organization dedicated to serving the needs of consumer bankruptcy attorneys and protecting the rights of consumer debtors in bankruptcy.
July 23, 2009 Senate Judiciary Subcommittee Hearing: “Worsening Foreclosure Crisis: Is It Time to Reconsider Bankruptcy Reform?”
July 20, 2009
The Senate Committee on the Judiciary / Subcommittee on Administrative Oversight and the Courts will hold a hearing entitled “The Worsening Foreclosure Crisis: Is It Time to Reconsider Bankruptcy Reform?” on Thursday, July 23, 2009 at 10:00 a.m. in Room 226 of the Senate Dirksen Office Building.
The hearing will be open to the public and seating is first-come, first-served.
Click here to watch a webcast of this hearing.
(Links to webcasts appear two hours before hearings begin, and video begins streaming live once the hearing is called to order.)
Webcast archives are accessible within 24 hours of the completed hearings. For a complete archive of Judiciary Committee webcasts, click here.
Why Did Lenders Oppose the Helping Families Save Their Homes Act?
May 3, 2009
Maryland bankruptcy attorney Brett Weiss has written an informative article discussing lenders’ opposing the Helping Families Save Their Homes Act, even though it would seem to have benefited them by reducing the number of foreclosures.
Read Mr. Weiss’s article here.
Update: Senate Fails to Pass Helping Families Save Their Homes Act AKA Judicial Modification of Mortgages (Bankruptcy) Bill
May 3, 2009
On April 30, 2009, the full Senate took up the House-passed Housing bill (ÂHelping Families Save Their Homes ActÂ).
Senator Dick Durbin (D-IL) offered a revised version of S. 61 as an amendment to the bill; the amendment needed 60 votes to pass.
The amendment failed on a vote of 45 for, 51 against.
All Republican Senators voted against the amendment.
The following Democrats voted against it:  Senators Tester and Baucus  Montana; Byrd  West Virginia; Specter  PA; Bennet  Colorado; Ben Nelson  Nebraska; Carper  Delaware; Dorgan  North Dakota; Landrieu — Louisiana; Lincoln and Pryor  Arkansas; and Johnson  South Dakota.
The above was excerpted from a National Association of Consumer Bankruptcy Attorneys update.
Update: Full Senate to Vote this Week on “Helping Families Save Their Homes Act” AKA Judicial Modification of Mortgages (Bankruptcy) Bill
April 29, 2009
The following is excerpted from a National Association of Consumer Bankruptcy Attorneys Alert:
Later this week, the full Senate is scheduled to take up the House-passed Housing bill (“Helping Families Save Their Homes Act”), also known informally as the Judicial Modification of Mortgages in Bankruptcy Bill.
When it comes up for vote, Senator Durbin will offer a revised version of S. 61 as an amendment to the bill. Here is a summary of the Durbin amendment.
The revised language of the Durbin amendment narrows considerably the availability of mortgage modification in bankruptcy. Even so, it may be difficult to get the Senate to pass it.
If you would like to support the Durbin amendment, email your two senators and President Obama. To send an email, click here.
Support is particularly needed from citizens in these states:
* Arkansas
* Delaware
* Florida
* Georgia
* Indiana
* Louisiana
* Maine
* Missouri
* Montana
* Ohio
* Pennsylvania
* West Virginia
Update: Judicial Modification of Mortgages (Bankruptcy) Bill in the Senate
March 16, 2009
The proposed “Helping Families Save Their Homes Act of 2009″ would give bankruptcy judges power to modify residential mortgages. For earlier posts on this topic, click here.
A version of the bill passed the House on March 5, 2009. It is now in the Senate, where some of its key provisions are facing opposition.
Democrats had hoped to vote on the bill before the April recess, but a vote has not yet been scheduled due to ongoing negotiations in the Senate.
Main areas of conflict appear to be the bill’s “cramdown” provisions and a proposal to limit bankruptcy relief to subprime mortgages only.
According to the National Association of Consumer Advocates, limiting the proposed relief to subprime mortgages would deny bankruptcy protection to approximately 60% of the homeowners most at risk of foreclosure.
The Center for Responsible Lending has summarized key provisions of the House version in this document. The document also discusses how the proposed legislation would reduce foreclosures without creating additional costs for U.S. taxpayers.
To voice your opinion about the proposed bill, call your Senator. The US Capitol Switchboard’s number is (202) 224-3121. A switchboard operator will connect you with the Senate office you request.
Portions of the above post were excerpted from a National Association of Consumer Advocates email alert.
Now scheduled for Senate vote:Â read the April 29, 2009 update
Status Report: Judicial Modification of Mortgages Legislation
January 27, 2009
It appears that the judicial modification of mortgages legislation (S. 61 by Durbin, HR 200 by Conyers, and HR 225 by Brad Miller) will NOT be part of the economic recovery package now under consideration in the House and Senate.
President Obama has reportedly asked Democratic leaders to exclude the mortgage legislation from the package.
However, President Obama has also reaffirmed his support for the mortgage modification legislation. The Administration is reportedly looking for a quick-moving vehicle to which to attach the legislation.
Possibilities include the 2009 omnibus appropriations bill, which congressional leaders hope to pass in the short term.
In the meantime, the House Judiciary Committee is marking up H.R. 200 at 1 p.m. today. Chairman Conyers will offer a manager’s amendment at that time. The amendment will reflect Citigroup’s January 8 decision to drop its opposition to the proposed legislation.
Some related information:
- Credit Suisse released a report yesterday, “Bankruptcy Law Reform – A new tool for foreclosure avoidance.” Report
- The Los Angeles Times editorialized yesterday in favor of judicial modification of mortgages as part of a broader approach to the foreclosure problem.
This post was excerpted from an email alert from the National Association of Consumer Advocates.
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