Chapter 7 Bankruptcy: Who Can File?

August 23, 2009

Use the questions below to determine whether you are eligible to file Chapter 7 Bankruptcy.Â 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 Three:Â Have you Had Another Bankruptcy Dismissed Within the 180 Days Prior to Filing the Current Bankruptcy?

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?

___________________________________________________________________________________

Question One:Â Are you Eligible under the Income Guidelines?

A.Â 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.Â 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.Â 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.Â 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?Â 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.Â 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.)

Question Three:Â Have you Had Another Bankruptcy Dismissed Within the 180 Days Prior to Filing the Current Bankruptcy?

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 filingÂ 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.Â 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.Â Additionally, you must be current on all tax returns in order to qualify for bankruptcy relief.

Question Seven:Â Have you Gathered Your Documents?

Please see this link for information about the documents you will need to gather to prepare your bankruptcy filing.

If you need help with any of the above questions, please call our office for a free bankruptcy phone consultation.