What's Required to File for Chapter 7?
Bankruptcy laws can be quite complex, thanks to the Bankruptcy Abuse Prevention and Consumer Protection Act that was passed in 2005. But there's no need to be discouraged. You don't have to go through it alone! A professional bankruptcy attorney can walk you through the process step by step. And at DebtStoppers, all you need is a job and a bank account to qualify for one of our no-money-down Chapter 7s.
In order to file, you'll first need to complete the following:
The means test determines whether you qualify for Chapter 7 based on your income level.
After you pass the means test, you must have credit counseling briefing before you can file for Chapter 7 or Chapter 13. A bankruptcy attorney can set you up with a qualified credit counselor.
Before your debts can be discharged, you are required to enroll in debtor education, otherwise known as a financial management course. Again, an attorney can help you manage this part of the process.
Worried about the requirements? Let a DebtStoppers bankruptcy attorney handle them for you! Our lawyers can help you through the preliminary bankruptcy process and answer any questions along the way.
The means test
The Chapter 7 means test determines how much income you can allocate towards a payment plan.
Passing the test indicates that you have no other means to pay off debts besides Chapter 7 bankruptcy. If you don't pass, the law assumes you would be better off filing for Chapter 13 and reorganizing your debts into a payment plan.
Again, most people who are considering bankruptcy pass the means test. If you're drowning in debt, chances are you don't have a lot of spare money. But since the test's calculations can be complex, why not do yourself a favor and seek professional assistance? Our bankruptcy attorneys can do the number-crunching so you don't have to.
There are two parts to the means test, and you only have to pass one to be eligible for Chapter 7.
Test #1: Median income
Your average household income over the past six months is compared with the median income in your state. You can find median income levels for Illinois here. If your income level is below the median, you qualify for Chapter 7 bankruptcy. If it's not, you'll go on to Test #2.
Test #2: Disposable income
This is where things get a bit more complicated, and your attorney's help can come in handy. After allowable expenses are deducted from your income, your disposable income — the amount you have left over to spend each month after making necessary payments — is determined. This is the amount that bankruptcy laws consider available for paying unsecured creditors. There are several outcomes:
- If your disposable income over the next five years is less than $6,000 (or $100/month), you pass and are free to file for Chapter 7.
- If your disposable income is greater than $10,000 over the next five years, the law assumes you don't really need to file for Chapter 7 bankruptcy and instead encourages you to file for Chapter 13. However, you may still be able to qualify for Chapter 7 if you can prove special circumstances.
- If your disposable income is between $6,000 and $10,000, you must pass another, more complicated test. This one compares your predicted disposable income to your unsecured debt. If your predicted disposable income is less than 25 percent of your unsecured, non-priority debts, you pass the means test. If not, you cannot be considered for Chapter 7 bankruptcy.
For more information on the means test, you can always check out the Chapter 7 Means Test law library page.
Feeling a bit overwhelmed by the idea of all that number-crunching? Remember, you don't have to be a math whiz to take the test. Our bankruptcy attorneys can do it for you!
Let DebtStoppers start you on the road to financial recovery
Get in touch with a Chicago attorney by calling toll free at 800-440-7235, or contact us online though our personal debt analysis form.