Qualifying for Chapter 7 Bankruptcy
There are certain financial requirements that must be met in order to be allowed to file for Chapter 7 bankruptcy. If you do not meet these requirements, you will need to file under Chapter 13 instead. This is commonly referred to as a means test.
Basically, you will not be allowed to file under Chapter 7 if:
- your income is above the median income for people in your state
- you have sufficient income to pay at least 25% of your unsecured debts over a period of three to five years
Whether you meet these criteria is determined by a form you prepare and file with the court.
Getting the Forms
You can download the forms and other paperwork you need to file a bankruptcy proceeding at US courts website, www.uscourts.gov. The forms include specific instructions for how to fill them out, sign them, and what additional paperwork such as financial statements, you will need to file with the court.
There is a filing fee for Chapter 7 bankruptcy is $335 (as of 2015), but if you can’t afford to pay it, the court will allow you to pay the fee in installments. The court may waive the fee entirely in some circumstances.
Filing with the Court Clerk and Notifying Creditors
Once all of your papers have been prepared, you are ready to file them with the court clerk. This is not difficult but things will go smoother if you know what to expect.
- Find the clerk’s office. Search online for the bankruptcy court closest to you. Bankruptcy is part of the federal court system, and only a few cities in some states have federal courts.
- What to bring. Bring your completed paperwork, copies of your financial records, and personal identification.
- Filing. Although it is possible to file by mail, filing in person is recommended. It is easier to establish a friendly relationship in person, and the more time you spend at the courthouse the more comfortable you will be with the process. When you enter the office look for signs pointing you to the clerk’s office or to the bankruptcy area.
The clerk will take your papers and check them to make sure everything is correct. If the clerk approves your paperwork, they will ask you to pay the filing fee and explain how you can pay. After you pay, you will be given a receipt, case number, and your papers will be stamped. Your papers are now filed.
If the clerk determines something is not correct, you will be told what is wrong. Clerks cannot give legal advice but they will usually tell you what is wrong with your paperwork and how to fix it. The clerk will identify problems with forms, such as if you forgot to sign something, fill in a space, or if you need another type of form, or to submit an extra copy.
Once your petition is filed, you should stop making payments (except for payments on secured debts, if you want to keep your property). From this point on, all payments for anything you make must be approved by a trustee.
Being Appointed a Trustee
Once your petition for bankruptcy is filed, all payments you make must be approved by the trustee. It will take a while to have a trustee appointed, but once you receive a notice in the mail with the name of the trustee, contact the trustee as soon as possible.
Tell the trustee that you just wanted to make an initial contact, and ask him or her if you may pay any bills you feel you need to pay. Also, ask the trustee any other questions you have. If you are continuing to make payments on secured property (such as your mortgage or car payment), mention this to the trustee.
Certificate of Completion of Personal Finance Course
One requirement for filing for bankruptcy is that you complete a course on personal financial management. The only time you do not need to do this is if one of the following situations applies:
- you are disabled or incapacitated
- you are on active military duty in a military combat zone
- your district's trustee's office has determined that the approved courses in your area are not adequate; you will need to check with the court clerk or trustee's office to find out if you live in one of these districts.
Filing your petition operates as an automatic stay. This prohibits your creditors from taking any collection action or from cutting off any services to you. Once your petition is filed, you may want to be sure to get your creditors off your back by sending them a letter notifying them that you have filed.
After you have filed your case, you will receive a notice of the date, time, and place of the meeting of creditors, which you must attend. The trustee will review your papers and ask you some questions. The questions are usually to verify what is in your papers, or to fill in information that you may have left out.
A few days before the meeting, call the trustee and ask him or her to tell you what information you should bring to the creditors' meeting. In all cases, be sure to bring copies of all the papers you filed and all the papers you have received regarding your case. You should also bring tax returns and other documents that support the information in the papers you filed. Each court may have its own particular requirements, which is why it is a good idea to ask the trustee.
Court Hearing and Approval of Plan
If the trustee determines that everything is in order, you should receive a discharge. Depending upon the procedures in your particular bankruptcy court, you may or may not have to appear before the judge. Your particular bankruptcy court may even have mass discharge hearings, in which many debtors are discharged at the same time and no questions are asked. All the judge does is give everyone a brief lecture about how your debts are now discharged, and how you should avoid getting into financial trouble again.
Once you have done all that is required to settle the case, an order will be entered discharging all of your dischargeable debts. You will not be discharged from:
- taxes, fines, or penalties owed to the government
- spousal or child support
- certain types of student loans
- obligations as a result of criminal or fraudulent actions
- any debts that were not declared in your bankruptcy or that involve creditors who were not notified in a timely manner