Chapter 7 Bankruptcy Filing: Brief Overview of Requirements

Filing chapter 7 bankruptcy is a legal process for individuals who can’t pay their debts. Under chapter 7, people petition for their debts to be eliminated without paying creditors. However, before debts can be eliminated, formally called liquidate, people need to meet requirements.

Pass the Means Test

Personal bankruptcy isn’t for people with a lot of disposable income. Of course, this doesn’t mean that they have to be penniless in order to qualify. However, the U.S. Bankruptcy Court requires individuals to pass a means test. This test determines if their income is low enough to qualify for chapter 7 bankruptcy. Individuals must compare their income, after paying their monthly bills, to their state’s median income (according to household size). When people’s income falls below the state’s median income, they meet the biggest requirement for filling chapter 7 bankruptcy.

Complete Pre-Bankruptcy Credit Counseling

Within 180 days before filing chapter 7 bankruptcy people must attend pre-bankruptcy credit counseling. The counseling consists of one session with a credit counselor either in-person, over the telephone or online. During the session, counselors review individuals’ financial situation and discuses budgeting. In addition, the credit counselors may propose possible alternatives to bankruptcy such as debt consolidation. The pre-bankruptcy credit counseling session cost approximately $50.

File for Bankruptcy

The necessary bankruptcy paperwork must be completed and filed with the U.S. Bankruptcy Court. Also, filing fees must be paid either all at once or in 4 installments.

Attend Meeting of Creditors

The meeting of creditors includes a bankruptcy trustee, individuals and their bankruptcy lawyers. In addition, creditors may be present although they aren’t required to be. During the meeting individuals are questioned by the trustee and/ creditors about financial affairs.

Attend Post-Filing Debtor Education

A second credit counseling session called the post-filing debt education course must be completed. If not, the people’s debts aren’t discharged. The session, like pre-bankruptcy counseling, can be taken over the telephone, in-person and online. During the course, people learn how to handle debts better. For example, counselors teach people how to develop personal budgets and manage money. The course costs from $50 to 100.

Contact a Lawyer about Filing Bankruptcy

Bankruptcy lawyers will assist people trying to get a fresh start through chapter 7. The lawyers will file bankruptcy, help find bankruptcy approved credit counseling organizations. Also, they will be with individuals through each step of the chapter 7 bankruptcy process.