How to File for Chapter 7 Bankruptcy – What the Courts Consider
To know how to file for Chapter 7 bankruptcy, you will need to hire a bankruptcy attorney as there will be a considerable amount of paperwork involved. In addition, an attorney will explain to you exactly what Chapter 7 bankruptcy means so that you do not go into the filing process blindly.
In some cases, the court might decide that you are still capable of paying your debts. For example, in 2013, rapper DMX’s bankruptcy case was thrown out by the court after it was contested by the bankruptcy trustee watchdog. To avoid this happening to you, you need to ensure that you are indeed unable to pay your creditors according to the court’s criteria.
The court may ask you to take a test to determine whether you are in a position to repay some of your debts if you have what is deemed sufficient disposable income. If you pass this test, the court will permit you to file for Chapter 7 bankruptcy. The court then determines your current financial status and ability to clear some of your debts by subtracting some allowed expenses as well as the set debt payments to clear a certain percentage of your unsecured debts within a given period, say five years.
Once you know how to file for bankruptcy Chapter 7, use an online calculator to figure out whether or not you are eligible for a Chapter 7 filing.
Can anyone file for Chapter 7 Bankruptcy?
You can get information for how to file Chapter 7 bankruptcy from many sources, but a particularly helpful source is attorney blogs online where you will find everything explained in easy to read language.
There are several aspects of the law that need to be considered, including:
- Your income must not surpass a certain amount. How much do you make? How does it compare to that of similar families in your state?
- You must take a test to determine if your income surpasses the set amount. Ten years ago, if the judge didn’t like you, he would just throw your case out. Thankfully, now there are rules and guidelines for bankruptcy eligibility.
- You must not have filed for bankruptcy in the past six years – this needs no explanation. If you find yourself in a financial quagmire less than six years after you last filed for bankruptcy, you will not be eligible.
- You must convince the court that you are not scamming or defrauding your creditors. You must give genuine reasons for why you have been unable to pay your creditors.
- If your application for either a Chapter 7 or Chapter 13 bankruptcy was dismissed by the courts in the past 180 days for any given reasons, your case will not be considered.
Why you Must Show your Income when Filing
In 2005, if a court initially decided a debtor was in a position to finance Chapter 13 debts, they were automatically dismissed. Debtors could easily be barred from filing a Chapter 7 bankruptcy case for meager reasons. Filing for bankruptcy meant that you had to prove to the judge that you are indeed income challenged and that you are not in a position to finance your debts.
If the court felt or proved that an applicant was trying to defraud the creditor, that applicant was automatically deemed unqualified for bankruptcy filing. In some instances, the judge’s attitude was enough to have your case dismissed, as there were no hard or defined rules as far as filing was concerned.
Today, knowing how to file a Chapter 7 bankruptcy is not as complicated as it was in the recent past. The courts have provided comprehensive criteria for those wish to file for a Chapter 7 bankruptcy. Those that have been affected by a sudden termination of employment or a sunken business are usually given the first priority. In some instances, the court will direct a debtor to file for Chapter 13 bankruptcy.
How your Income is Calculated by the Court
The minute you declare your interest in filing for a Chapter 13 bankruptcy, the courts will want to determine your current income and your overall financial situation. This can be calculated by comparing your current monthly income to the general income of other similar families in your state.
Note that your current monthly income will be treated as your consistent income for the past six months prior to your Chapter 7 bankruptcy filing. In the event that your current income is equal to or less than the provided median, the court will declare you eligible for Chapter 7 bankruptcy filing.
On the other hand, if your income surpasses the median, you will be required to take the means test. Courts are skeptical about bankruptcy applicants who have received a Chapter 7 bankruptcy in the past. You must have completed no less than 8 years in the case of a Chapter 7 and six years in the case of a Chapter 13 from the time of filing.
When thinking about how to file bankruptcy Chapter 7, you should consider that the courts must determine that you are not in any way trying to take advantage of your creditors. For starters, the court must establish that you are not making any efforts to conceal your property or money in a bid to be pardoned of your debts and financial responsibilities.
My name is Craig R. Chlarson. Whether you are seeking to eliminate your debt, typically through a chapter 7 filing, or whether you are seeking to reorganize your debt, typically through a chapter 13 filing, or even if you have basic bankruptcy questions, call me today. I can help you.
To schedule an appointment, call (435) 901-3449
Schedule Your Free Consultation
299 South Main Street
13th Floor, Wells Fargo Tower
Salt Lake City, UTAH 84111
P | (435) 901-3449
F | (801) 961-4001