Bankruptcy – Chapter 7 – Filing, Qualifications & Means Test
CHAPTER 7 BANKRUPTCY – Frequently Asked Questions:
Q: What is a Chapter 7 Bankruptcy?
A. A “Chapter 7 Bankruptcy” is often referred to as “straight” bankruptcy or as “liquidation” in bankruptcy. It is the most common form of bankruptcy filing. In many ways it offers a financial “fresh start” to the qualified debtor by giving the debtor a “discharge” or release from many of his or her debts.
Q: Who can file a Chapter 7 Bankruptcy?
A. Individuals and businesses can file a Chapter 7 Bankruptcy. Married couples can choose to file jointly (one bankruptcy case for both spouses), or either spouse can file an individual bankruptcy case without the other spouse filing. Corporations, limited liability companies and most other business entities can file a Chapter 7 case. In very rare situations, creditors may even file an “involuntary” Chapter 7 case against a debtor.
Q : What are the qualifications for filing Chapter 7 Bankruptcy?
A. To qualify to file a Chapter 7 Bankruptcy, you must not have filed a prior Chapter 7 Bankruptcy within eight (8) years of the date of filing a new bankruptcy, and, if a majority of your debts are consumer or non-business debts, you must have income to the household below certain levels (i.e. You must pass the “Mean’s Test”). You must also complete a course or seminar on credit counseling prior to filing your bankruptcy petition.
Q: What is the “Means Test”?
•A. The “Means Test” is the common name for a system used in bankruptcy to evaluate whether or not you have the potential ability to repay all or part of your debts, and therefore should be required to file a Chapter 13. The “Means Test” uses an average of your gross or total “household income” for the last six months to determine a “Current Monthly Income”. It then checks to see if your Current Monthly Income (after some deductions for taxes, medical insurance payment, secured debt payment, and other items) is more or less than a national average needed for the basic support of a household of similar size. If your adjusted Current Monthly Income is below this national average, then you “pass the Means Test”, and you qualify under that system to file a Chapter 7 Bankruptcy case.
Q. Do I have to take a credit counseling course?
A. Yes. Prior to filing for bankruptcy, the law now requires that all individuals take a credit counseling course or seminar from a qualified consumer credit counseling agency. The course is designed to assist you in evaluating your credit/debt situation, and to help you determine the best course of action for your particular circumstances. You must obtain a certificate of completion of this course before you can file a individual bankruptcy case. The course can be completed “on-line” on the internet at a number of credit counseling agencies.
Q. What is the Creditors Meeting?
A. The Court will assign a date about four weeks after the filing of your case for a Creditors Meeting to be held. You must attend. It will usually be held in a meeting room at the courthouse, and is conducted in an informal manner. The Creditors Meeting is intended to provide your creditors with an initial opportunity to ask you questions about your assets, and about your indebtedness. As a practical matter, very few creditors actually attend Creditors Meetings. The Trustee will preside at this Meeting, and he/she is required to examine under oath each debtor about his/her bankruptcy filings, assets and other matters. The typical Creditors Meeting only last 5 to 10 minutes.
Q. Who is the Trustee, and what does he/she do?
A. There are two types of trustees involved with bankruptcy cases – the U.S. Trustee, and the standing trustee. You are only likely to meet with or deal with a standing trustee who is private individual that has been appointed to serve as trustee for cases which are randomly assigned to him/her. The Trustee for you case is responsible for representing the bankruptcy estate and its creditors. The Trustee will conduct the Creditors Meeting. An essential part of the Trustee’s duties in the case is to determine if there are any debtor assets that could be successfully sold to realize money (net after exemptions and costs) for payment to the unsecured creditors.
Q. Do I have to take any other counseling courses?
A. Yes. After you file an individual bankruptcy case, you must complete a financial management course or seminar from a qualified consumer credit counseling agency. The course is designed to help you establish a budget and to better manage your spending in the future. You must obtain a certificate of completion of this course within 60 days of the date of the Creditors Meeting. This course can also be completed “on-line” on the internet at a number of credit counseling
Contacting the Right Attorney: Bankruptcy can be a complicated matter. The responses to these Frequently Asked Questions are general in nature, and are not intended to provide legal advice for specific cases. A consultation with a Georgia bankruptcy attorney can provide you with the information you need to determine which option best addresses your circumstances. As a solo practitioner, I am able to give more time and personalized attention to my clients. I will personally communicate with creditors or banks to resolve your issues. Your case will never be handed down to a legal assistant or other staff member.
NOTICE: The services or benefits offered are bankruptcy relief under the provisions of the U.S. Bankruptcy Code. We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.