Bankruptcy Requirements for Chapter 7
Individuals, spouses, and business entities can qualify to file under Chapter 7 of the Bankruptcy Code. However, Chapter 7 has other bankruptcy requirements that must be met to obtain a bankruptcy discharge.
Learning the bankruptcy requirements for Chapter 7 is important. The bankruptcy requirements determine whether you can receive a bankruptcy discharge in a Chapter 7 case.
Chapter 7 Bankruptcy Requirements for Filing — Debtor Status
As discussed above, individuals, spouses, and business entities can file under Chapter 7. Business entities include partnerships, corporations, and limited liability companies.
In addition to the bankruptcy requirements for the debtor’s status, there are bankruptcy requirements for prior bankruptcy filings. If a prior bankruptcy case was dismissed within 180 days for failure to obey a court order or appear in court, the current case would be dismissed. Furthermore, if the debtor received a discharge under a prior Chapter 7 case within eight years, the debtor is not qualified to receive another bankruptcy discharge until after eight years. If the prior bankruptcy was under Chapter 13, you must wait at least six years before filing a Chapter 7 case.
Chapter 7 Bankruptcy Requirements for Filing — Credit Counseling Course
Some bankruptcy requirements are simple to complete, but they simply take a little bit of time to complete.
Individual debtors must complete a creditor counseling course within 180 days before the filing date of the Chapter 7 petition.
The course can be completed online, by telephone, or in person. Some companies offer all three formats while other companies offer online courses only.
An online credit counseling course can be completed in about 90 minutes. The charge for the course can be as low as $15.
Once you complete your credit counseling course, the company issues a certificate for you to file with your Chapter 7 bankruptcy petition.
Chapter 7 Bankruptcy Requirements for Filing — Income Requirements
Another one of the important bankruptcy requirements for a Chapter 7 filing is the Means Test.
The changes in bankruptcy laws in 2005 added income restrictions for Chapter 7 filings. There are very few exceptions to the income restrictions. Companies and individuals with mostly business debts do not have the same bankruptcy requirements for income as consumer debtors.
Calculate Current Monthly Income and Annual Income
Your annual income is based on your income from all eligible monthly income sources during the six months immediately before filing the bankruptcy petition. Examples of eligible monthly income include:
- Wages, tips, salaries, bonuses, commissions, and overtime
- Rental income
- Alimony and child support
- Gross income from operation of a business
- Annuity payments
- Retirement income (Social Security retirement benefits are not included)
- Unemployment compensation
- Dividends, interest, and royalties
- State disability payments
To calculate your annual income, add together all eligible income for the past six months and divide the total by six. Multiply the result by 12 to determine your average annual income.
Compare Your Average Annual Income to the State Median Income
If your annual income is below the median income for your state, you pass the Means Test. In other words, you meet the bankruptcy requirements for Chapter 7 income limits.
However, if your annual income exceeds the median income for your state, you fail the test. Don’t worry! There is a second section of the Means Test that many people pass to satisfy the Chapter 7 bankruptcy requirements for income.
Calculating Disposable Income
In the second section of the Means Test, you calculate the amount of your monthly disposable income. Your disposable income is the amount of money each month you can pay toward your debts.
To calculate disposable income, you subtract allowable expenses from your average monthly income. If the result is negative, you pass the Means Test. If the result is within limits for disposable income, you pass the Means Test.
However, if your disposable income is enough to repay some of your debts, you fail the Means Test. If you want to file for debt relief, you would need to file under Chapter 13 of the Bankruptcy Code.
The bankruptcy requirements for disposable income are not flexible. As disposable income increases, the likelihood the debtor will meet the income bankruptcy requirements for a Chapter 7 case.
Chapter 7 Bankruptcy Requirements for Filing — Debtor Education Course
Another one of the important bankruptcy requirements requires you to complete a second bankruptcy course before receiving your bankruptcy discharge.
The debtor education course is the second bankruptcy course that you must complete. The bankruptcy requirements include this course to help debtors learn more about budgets, saving money, and using credit wisely.
If you fail to complete your debtor education course and file the certificate of completion by the deadline issued by the court, you cannot receive your bankruptcy discharge. Obtaining a bankruptcy discharge is the ultimate goal of filing a Chapter 7 bankruptcy case.
As far as bankruptcy requirements go, completing your debtor education course must be one of your top concerns. You cannot complete the debtor education course until after your bankruptcy petition is filed. Because this is so important, it is best if you complete the course as soon after you receive your case number as possible.
The debtor education course is generally available from the same company you used to complete your credit counseling course. The fact that the company already has your information entered into the system is an advantage of using the same company to complete this course.
The fee for the second bankruptcy course is approximately the same or lower than the fee for the credit counseling course. The course is available online and can be completed in about two hours.
Upsolve can provide additional information about low-cost bankruptcy courses to help you meet these bankruptcy requirements.
Chapter 7 Bankruptcy Requirements for Filing — Official Bankruptcy Forms
You are required to use the official bankruptcy forms available from the United States Bankruptcy Court. Some websites claim to have the official bankruptcy forms, but it is best to use the forms provided by the court.
If you choose to use Upsolve to assist you with filing your Chapter 7 case, we provide the official bankruptcy forms for you to complete and file. You do not need to worry about whether you will meet the bankruptcy requirements for forms when you use our system to complete the forms.
Why Do I Want a Bankruptcy Discharge?
Your bankruptcy discharge eliminates your legal liability to repay a discharged debt. In other words, creditors who debts are discharged in Chapter 7 cannot take any action to collect the debt. You never have to worry about paying a discharged debt.
If you do not receive your bankruptcy discharge, you continue to owe all the debts you owed before filing bankruptcy. For your creditors, it will be as if you have never filed for Chapter 7 debt relief if you fail to meet all bankruptcy requirements for a discharge.
Let Upsolve Help You File a Chapter 7 Bankruptcy Case
Are you ready to get rid of your debt? If so, Upsolve is here to help you. We are a non-profit organization that assists low-income households to obtain debt relief through Chapter 7.
Some individuals can afford to hire a bankruptcy attorney to help them with their case. However, we understand that many people do not have the money to hire an attorney. We are committed to helping those without the money to hire an attorney file a Chapter 7 case without an attorney.
If you want help with your financial problems, click here to being Upsolve's bankruptcy process at no cost to you.