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Filing Chapter 7 under the new laws.
It's easier than you think!
There has been much doom and gloom written about the bankruptcy means test under the new laws and how much more difficult it's going to be to file Chapter 7. It's true that there are more hoops to jump through under the new laws and it's true that the bankruptcy means test will result in some people having to file chapter 13 instead of Chapter 7. However, for the vast majority of filers Chapter 7 is still available with very little extra effort!
Proprietary research by Best Case Solutions shows that more than 85% of current Chapter 7 debtors will have income below their state medians for their household size*, so for most cases, the full bankruptcy means test will not have to be completed and the debtor can file Chapter 7. Note that if one does not pass the 1st. stage of the bankruptcy means test that there is another bankruptcy means test to be conducted which will allow most of the 15% remaining to also file Chapter 7. Reference
*Research was done by Best Case Solutions, Inc., on 11,013 consumer cases filed in 44 states and DC June 15 - July 6, 2005, with the Best Case OneTouchT Electronic Filing System. Data examined was from filed cases only, and thus public record.
Ed Flynn, Executive Office for United States Trustees and Gordon Bermant, Burke, Virginia reported in their study of a sample of 1,938 cases that the bankruptcy means test resulted in only two Chapter 7 petitions that would not be allowed under the new law. BANKRUPTCY BY THE NUMBERS, MEANS-TESTING AND PRE-BANKRUPTCY PLANNING - BY: ED FLYNN Executive Office for United States Trustees & GORDON BERMANT Burke, Virginia
Are you eligible to file Chapter 7?
1st. Stage of the Bankruptcy Means Test: Check to see if the monthly average of your last 6 months gross income is below the median income for your state. If it is you can file Chapter 7: State Median Incomes
2nd. Stage of the Bankruptcy Means Test: If your income is slightly higher than your state's median income you may still be able to file Chapter 7. Your bankruptcy lawyer will be able to make this calculation and also advise on allowable expenses that can be used in the calculation. |
Two extra hoops to jump through
- A person filing Chapter 7 bankruptcy will have to take an approved Credit Counseling Course within the 6 months before he or she files. Your bankruptcy lawyer can set this up for you or you can find a list of approved credit counselors here. In some cases the course can be taken over the Internet.
- An approved Financial Management Course will have to be completed before you can be discharged. Your bankruptcy lawyer can set this up for you or you can find a list of approved credit counselors here.
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