Personal Bankruptcy Questions

Filing for Chapter 7 Bankruptcy may not be that easy considering the new set of rules found in the 2005 BAPCPA. But taking the time to sit down and study the computation is not that difficult. Before an individual can file for any bankruptcy under any chapters of the Bankruptcy Code, the debtor must first consider his or her eligibility.

Any individual strained by liabilities can file for either a Chapter 13 or Chapter 7 Bankruptcy. While most debtors generally prefer the immediate relief brought by a Chapter 7 petition certain requirements must be met for one’s qualification. First, the debtor must compute through the means test the amount of average earnings he or she has six months prior of filing the petition and compare it to the median income of the state. This is the first step because in reality, only those whose income are less than the median income are given the opportunity of filing for a Chapter 7 Bankruptcy.

If however your income is well beyond the median income, further calculation is needed to determine eligibility for liquidation procedure. Calculating the debtor’s available income for a five-year plan is the next step in the means test. It is taking into account the debtor’s income subtracted by his or her expenses and multiplying the result to 60. Generally, an available income of the $10,000.00 or more for a five-year period disqualifies an individual for filing for a Chapter 7 Bankruptcy.

In cases where individuals earn above median but cannot afford the $166.67 per month for payment of debts, they must take the final part of the test to further determine if Chapter 7 is an option for them. This is true for earners with monthly available income of $100.00 to $166.00 where it is measured against 25% of the total debt to be paid in five years time. If the resulting available income is $6,000 to $10,000 and is less than the 25% of the debtor’s total debt then he or she is eligible to file for a bankruptcy under Chapter 7. If however the available income computed is more than the 25% of the debt, Chapter 13 is the only option to take.

If ever your income qualifies for a Chapter 7 petition for bankruptcy, then the next thing to do is perhaps hire a legal adviser. Usually, upon filing, the debtor is required to file a list of creditors fully sworn and a financial report of the assets and liabilities. Also required are the schedule of current earnings and expenses, the debtor’s financial statement and a list of properties qualified for exemption. Perhaps the most important document to prepare with regards to creditors’ satisfaction is the statement of intent concerning liabilities secured by property of the created estate. Upon filing, relief by way of the automatic stay is immediately granted to the petitioner.

From here on forward, cooperation with the trustee is the most vital aspect.

Click here for more information on Chapter 7 Bankruptcy Eligibility.