Unlike chapter 13 where reorganization of debts takes place and a repayment plan is involved, chapter 7 is a no-asset case. However, you can protect some of your property using exemptions provided by state or federal laws. All non-exempt property of the filer is at the disposal of a bankruptcy trustee who can liquidate them to pay your creditors. Lawyers of Los Angeles based bankruptcy law firm Recovery Law Group say chapter 7 bankruptcy is the best way to get financial relief no matter how much the debt provided you can qualify for it.
Who can qualify for chapter 7 bankruptcy?
Debt relief through chapter 7 bankruptcy is available for people having low income. In this case, the monthly income is calculated as an average of the previous 6 months before the bankruptcy filing. If the monthly income is less than the state median income for a household of similar members then you can file for chapter 7 bankruptcy. However, if your income is higher than the state median, you need to pass the means test. This test is used to determine if you have enough disposable money to pay some of your debts. In case you do, you cannot qualify for chapter 7 bankruptcy.
Presumption of abuse will be considered if the amount available to pay creditors (more than 25% of unsecured debt) to be paid in five years is more than $12,850. However, if you can show that due to certain circumstances you won’t be able to pay this, only then you can file for chapter 7 bankruptcy, else the case will either be dismissed or converted into a chapter 13 bankruptcy.
Other requirements that can affect your chapter 7 bankruptcy eligibility are the dismissal of a previously filed bankruptcy case (180 days prior to filing) due to failure to appear or comply or because the debtor voluntarily dismissed the petition. Additionally, you should have attended the mandatory credit counseling course from an approved agency within 180 days prior to a bankruptcy filing.
What do you need to file for chapter 7 bankruptcy?
After filing a petition in bankruptcy court, the debtor must also file the following documents:
- Financial account statement
- List of assets and liabilities
- Schedule for income and expenditures
- Any contracts or unexpired leases
- Proof of any payment received in 60 days prior to a bankruptcy filing
- Credit counseling certificate and copy of repayment plan etched out
- Monthly net income along with any expected increase in either income or expenses
- Any qualified education or tuition accounts the debtor has
Bankruptcy lawyers are your best bet if you wish to get rid of the huge mountain of debts. Call 888-297-6023 to speak with experienced bankruptcy lawyers regarding your options.