What Are the Eligibility Requirements for
Filing Chapter 7 Bankruptcy?
BUDGET: The Court will assess whether you have sufficient
disposable income to pay your creditors. Disposable income
is the money you have left over every month after expenses
have been paid.
EXAMPLE: After taxes are withheld from your paycheck, you
bring home $1,000 per month. After paying rent, utilities, car
payments, food, clothing and miscellaneous expenses, you
have spent $950. In this case, you would have $50 in
disposable income for the month.
CAUTION: The Bankruptcy Court reviews expenses you have
listed in your budget to determine the reasonableness of
each budget item.
How will bankruptcy affect my credit?
There is no clear answer to this question since most creditors
decide on a case by case basis whether or not to extend
credit. Unfortunately, if you are behind on your bills or have a
high debt load, you may already have trouble getting credit.
Bankruptcy eliminates your debts. Some creditors view
someone who has received a Chapter 7 discharge as a better
risk than someone with a high debt load. That's because after
receiving a Chapter 7 discharge, a debtor cannot file another
Chapter 7 bankruptcy petition for at least eight (8) years from
the date the Chapter 7 was filed. Furthermore, the consumer
may now have the ability to pay new debts since previous
debts have been eliminated.
What can I keep in a Chapter 7 bankruptcy?
In a Chapter 7 bankruptcy, you may keep all exempt (legally
protected) belongings. The attorney will review your assets
and available exemptions to determine whether the things you
own are exempt. There are several categories of exempt
property. Debtor’s who have property exceeding legal limits
may choose to file a Chapter 13 bankruptcy to protect
additional assets.
Can I keep assets that a creditor has a security interest
in -- such as my house, car, jewelry, furniture or
computer -- that I financed with a creditor? (This refers
to store creditors or loan companies that financed the
items you purchased or creditors who placed a lien on
items you already own.)
In most cases, you will not lose your property as long as the
value of the property does not exceed applicable exemption
laws and you continue to make payments for these items.
Although bankruptcy discharges the debt, secured creditors
can take back their secured merchandise (car, house,
furniture, jewelry or other collateral) unless you agree to
repay the debt. You must continue to make payments on the
secured items you want to keep.
If you are unsure if the creditor is secured, show the purchase
agreement to the attorney. The attorney will evaluate the
value of the item and the nature of the debt, and advise you
regarding your rights and obligations in these matters.
Can I eliminate all of my debts?
Most debts are dischargeable. Student loans may only be
discharged under limited circumstances and require a special
hearing. Recently acquired debts, recent cash advances or
debts you obtained after bankruptcy counseling may not be
dischargeable. Debts obtained within a short time prior to
filing the bankruptcy are presumed to be non-dischargeable.
Other debts that are non-dischargeable include but not
limited to: child support, alimony, debts obtained by fraud,
plus debts resulting from willful and malicious harm such as a
DUI-related accident.
Although judgments are discharged, judgment liens on real
estate remain. An additional retainer is required to remove
judgment liens. It’s important to remember that you MUST list
ALL your debts on the bankruptcy petition; even those that
are not dischargeable. Discuss all debts with your attorney to
determine if they may be dischargeable.
How long does the bankruptcy process take and what
will happen?
The attorney will prepare the petition for bankruptcy after you
have returned all the requested information and made
suitable arrangements to pay the balance of fees and costs in
full. You will meet with an attorney to review your petition and
receive instructions for testifying at the trustee’s meeting. You
must sign the bankruptcy petition before it can be filed.
The trustee's meeting will be scheduled at the time the
bankruptcy is filed (about 3 – 6 weeks from the date the
petition is filed). At the trustee's meeting, the trustee will ask
you questions to make sure your petition is correct. If the
petition is for a Chapter 7 bankruptcy, you will be granted a
discharge within three (3) months of your trustee's meeting.
A Chapter 13 bankruptcy is discharged when the payment
plan to the Court is complete. This is usually 3-5 years from
the date you begin your Chapter 13 plan payments.
What information do I need to file the bankruptcy?
You will need the following essential information to file the
bankruptcy petition:
Filing Chapter 7 Bankruptcy?
BUDGET: The Court will assess whether you have sufficient
disposable income to pay your creditors. Disposable income
is the money you have left over every month after expenses
have been paid.
EXAMPLE: After taxes are withheld from your paycheck, you
bring home $1,000 per month. After paying rent, utilities, car
payments, food, clothing and miscellaneous expenses, you
have spent $950. In this case, you would have $50 in
disposable income for the month.
CAUTION: The Bankruptcy Court reviews expenses you have
listed in your budget to determine the reasonableness of
each budget item.
How will bankruptcy affect my credit?
There is no clear answer to this question since most creditors
decide on a case by case basis whether or not to extend
credit. Unfortunately, if you are behind on your bills or have a
high debt load, you may already have trouble getting credit.
Bankruptcy eliminates your debts. Some creditors view
someone who has received a Chapter 7 discharge as a better
risk than someone with a high debt load. That's because after
receiving a Chapter 7 discharge, a debtor cannot file another
Chapter 7 bankruptcy petition for at least eight (8) years from
the date the Chapter 7 was filed. Furthermore, the consumer
may now have the ability to pay new debts since previous
debts have been eliminated.
What can I keep in a Chapter 7 bankruptcy?
In a Chapter 7 bankruptcy, you may keep all exempt (legally
protected) belongings. The attorney will review your assets
and available exemptions to determine whether the things you
own are exempt. There are several categories of exempt
property. Debtor’s who have property exceeding legal limits
may choose to file a Chapter 13 bankruptcy to protect
additional assets.
Can I keep assets that a creditor has a security interest
in -- such as my house, car, jewelry, furniture or
computer -- that I financed with a creditor? (This refers
to store creditors or loan companies that financed the
items you purchased or creditors who placed a lien on
items you already own.)
In most cases, you will not lose your property as long as the
value of the property does not exceed applicable exemption
laws and you continue to make payments for these items.
Although bankruptcy discharges the debt, secured creditors
can take back their secured merchandise (car, house,
furniture, jewelry or other collateral) unless you agree to
repay the debt. You must continue to make payments on the
secured items you want to keep.
If you are unsure if the creditor is secured, show the purchase
agreement to the attorney. The attorney will evaluate the
value of the item and the nature of the debt, and advise you
regarding your rights and obligations in these matters.
Can I eliminate all of my debts?
Most debts are dischargeable. Student loans may only be
discharged under limited circumstances and require a special
hearing. Recently acquired debts, recent cash advances or
debts you obtained after bankruptcy counseling may not be
dischargeable. Debts obtained within a short time prior to
filing the bankruptcy are presumed to be non-dischargeable.
Other debts that are non-dischargeable include but not
limited to: child support, alimony, debts obtained by fraud,
plus debts resulting from willful and malicious harm such as a
DUI-related accident.
Although judgments are discharged, judgment liens on real
estate remain. An additional retainer is required to remove
judgment liens. It’s important to remember that you MUST list
ALL your debts on the bankruptcy petition; even those that
are not dischargeable. Discuss all debts with your attorney to
determine if they may be dischargeable.
How long does the bankruptcy process take and what
will happen?
The attorney will prepare the petition for bankruptcy after you
have returned all the requested information and made
suitable arrangements to pay the balance of fees and costs in
full. You will meet with an attorney to review your petition and
receive instructions for testifying at the trustee’s meeting. You
must sign the bankruptcy petition before it can be filed.
The trustee's meeting will be scheduled at the time the
bankruptcy is filed (about 3 – 6 weeks from the date the
petition is filed). At the trustee's meeting, the trustee will ask
you questions to make sure your petition is correct. If the
petition is for a Chapter 7 bankruptcy, you will be granted a
discharge within three (3) months of your trustee's meeting.
A Chapter 13 bankruptcy is discharged when the payment
plan to the Court is complete. This is usually 3-5 years from
the date you begin your Chapter 13 plan payments.
What information do I need to file the bankruptcy?
You will need the following essential information to file the
bankruptcy petition:
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The value of your personal property The names and addresses of your creditors, the plus the pay-off statements for cars and mortgages A budget showing how much money you bring home every month, plus a list of your expenses |
Frequently Asked Questions (FAQs)