Chapter 7 Bankruptcy Requirements

As of October 2005, when new bankruptcy laws were passed, there are more stringent requirements in place for those wanting to file for Chapter 7 bankruptcy. These new bankruptcy requirements and laws were put in place as a means of limiting abuse of the Chapter 7 bankruptcy system by people wanting to quickly eliminate debt. Essentially, the bankruptcy laws of 2005 make it harder to qualify for a Chapter 7 if you have an income sufficient for filing for Chapter 13 – which is more a reorgination of debt, as opposed to Chapter 7’s elimination of debt.

The Means Test

Before filing for bankruptcy – be it Chapter 7 or Chapter 13 – you must first take what is known as the means test. The means test is a two part financial evaluation which will determine whether or not you qualify for Chapter 7 or Chapter 13 bankruptcy. If it is determined that you have the “means” to file Chapter 13, then you will be required to do so. Otherwise, you will be eligible for Chapter 7 and can commence with the filing process.

The Credit Counseling Requirement

Once you have taken the means test and it has been determined that you are eligible to file for Chapter 7 based on your income levels, you will also have to obtain a credit counseling certificate before filing bankruptcy.  The credit counseling requirement is yet another stipulation of the tougher bankruptcy laws and requirements enacted in October 2005. To get the certificate, you simply have to attend a credit counseling class. The class typically lasts 45 to 90 minutes, costs no more than $50.00, and must be completed within the 180 days immediately preceding the filing of the Chapter 7 bankruptcy petition. You will file your credit counseling certificate along with your Chapter 7 bankruptcy petition.

Other documents required to file Chapter 7 bankruptcy

Per the bankruptcy laws of 2005, there are several documents you will need to file for Chapter 7 bankruptcy. The following documents are required to file:

• A list of all of your debts: This list will need to include creditors, lien holders, and even friends or family who have given you personal loans.
• Documentation proving your income: To substantiate your income, you will need to provide the last seven months of pay stubs, income statements, and the last two years of your income tax returns, if filed.
• Monthly expenses: Be sure to document what your monthly “cost of living” is.
• Documentation regarding the value of your assets: also required when filing for bankruptcy.
• Disclosure to the Bankruptcy Court as to whether or not you are a party in a pending lawsuit or have been a party to a lawsuit in the last year.

Requirements post-filing: The Financial Management Course

After filing your petition for Chapter 7 bankruptcy, you will also be required to attend a “financial management course.” This course will generally be available through the same agency as the one which offered your credit counseling class. The financial management course must be taken before you will be able to receive a bankruptcy discharge for your debts.

Because filing for Chapter 7 has gotten more and more complex since the laws have changed in 2005, it is always important to seek counsel from a licensed and seasoned bankruptcy attorney before filing. The attorneys here at Clark and Washington will be more than willing to help you make sure you meet all of the requirements to file and direct you though the intricacies of the Chapter 7 bankruptcy process.