Steps Of Filing Ch. 7

What Requirements Must Be Met To File For A Chapter 7 Bankruptcy?

In this article, you will discover:

  • The requirements to file Chapter 7 bankruptcy
  • What the means test is
  • Chapter 7 bankruptcy exemption rules
  • Dischargeable debt under Chapter 7
  • Debt not dischargeable under Chapter 7
  • Assets one can keep under Chapter 7
  • Steps of filing Chapter 7

The main requirement to be met to file a Chapter 7 bankruptcy is that you qualify financially. Financial qualification is based on what the median income is for your family size in the United States. The one exception to this rule is if a person’s business debt is larger than their consumer debt, which automatically qualifies you to file a Chapter 7 bankruptcy.

What Is The Means Test?

The means test is the starting point for determining if an individual will qualify financially for Chapter 7 bankruptcy. If the client is below the median for their family size, then there is no presumption of abuse of the bankruptcy process. This, in turn qualifies you to file Chapter 7. These are hard numbers that can guarantee that you meet the requirement.

It gets a little more complicated if your income is above the median income. Then we need to determine what deductions are allowed under the law. Once those deductions are taken, we look to see if there is too much disposable income to qualify to file.

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What Are Chapter 7 Bankruptcy Exemption Rules In Texas?

In Texas, we have probably the most favorable exemption law of any state in the country. We can either use the state exemptions to exempt client’s property, or we can use the federal exemptions. You cannot switch between the two, but pick one or the other. You need to understand that there are certain federal statutes that are adopted into the state exemptions. For instance, social security funds are exempt under federal law but not under Texas law, but we can use the social security exemption even if the client is using the state bankruptcy exemptions. Texas allows for very good exemptions, and we very seldom see an instance where we might have a problem exempting a particular asset.

What Type Of Debt Typically Is Dischargeable In A Chapter 7 Bankruptcy?

Typically, a Chapter 7 bankruptcy will discharge the debtor’s personal liability with respect to unsecured debts. Those debts typically include credit card debt, medical bills, signature loans, and payday loans, which are becoming more of a problem. With respect to secured debt in a Chapter 7 bankruptcy, the debtor is left with a choice of one of three different ways of treating the secured creditor. You can retain the collateral and keep paying, surrender the collateral in full satisfaction of the debt or pay the debt off. Additionally, there are certain income taxes that can be discharged in a Chapter 7 bankruptcy. The one thing that everyone should know is not discharged is any type of educational loan, whether it is private or public.

What Debt Is Not Forgiven In A Chapter 7 Bankruptcy?

Certain income taxes and educational loans are not discharged in a Chapter 7 bankruptcy.

What Assets Can I Keep In A Chapter 7 Bankruptcy?

It is important here to point out that probably 95% or more of all Chapter 7 bankruptcies are no asset Chapter 7’s. Because of this, there is not any property that the debtor will need to give up. People often believe that they will have to give up their car and/or their home, but this isn’t true. If they ever need to give up any asset, we will discuss this with the client in advance.

There are rare instances where the trustee might take an asset that is not exempt, sell it, and distribute the money to the debtor’s unsecured creditors.

Walk Me Through The Steps Of Filing A Chapter 7 Bankruptcy?

The debtor can expect a creditor’s meeting within about 30 days of filing their case. This is an opportunity for any creditor who wants to make an appearance to examine and question the debtor. Again, in about 95% of cases, creditors do not appear at the meeting. This is just a chance for the trustee to do their due diligence to make sure that there are no non-exempt assets that the debtor owns. Once the creditor’s meeting is held, the process moves quickly. Within 90 days from the date of filing the case, the debtor will receive their discharge.

For more information on Chapter 7 Bankruptcy In The State Of Texas, an initial consultation is your next best step. Get the information and legal answers you are seeking by calling (888) 402-5557 today.

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