Chapter 7 Bankruptcy: Quick Facts

Means Test

Before you can decide to file a Chapter 7 bankruptcy petition, you will have to complete the means test in order to make sure that you are truly in need of your debts to be discharged, and are not just "abusing" the system. Don't be intimidated by the sound of that-it's a straightforward test, and most debtors fully qualify for Chapter 7 bankruptcy.

The Chapter 7 means test is divided into two parts, both focusing on your income and expenses.

Step One: Assess Monthly Income

The first part of the test compares your monthly income (which is determined by a worksheet that the court will provide) to the median income for your area and household size. If your monthly income is at or below the median, the means test is over-there is no presumption of abuse and you can file for Chapter 7 bankruptcy.

The median will vary fairly significantly according to your geographic location and the size of your family. In New York, the Median Income for a family of four is $79,966. The U.S. Trustee's Office has a page on their web site with the most up-to-date median incomes, in NY use the following table:

Step Two: Deduct Allowable Expenses

If you find that your income exceeds the state median, it doesn't necessarily mean that you won't be able to file under Chapter 7. This just means you must move on to the second part of the test. During the second step, you will deduct certain allowable expenses from your monthly income based on IRS standards. The remaining amount over after these allowable expenses is your disposable income. Then you will multiply that number by 60 to determine how much disposable monthly income you'll have over the next five years.

If the total turns out to be less than $6000, then you have passed the means test, and you may file bankruptcy under Chapter 7, since there is no presumption of abuse. On the other hand, if the total is over $10,000, then there is a presumption of abuse, though you will be given the chance to include additional necessary expenses to reduce your monthly income.

However, if your total disposable income for the five-year period falls between $6000 and $10,000, then you must make one more calculation. For this step, you will take your expected disposable income over the next five years-that number you calculated falling between $6000 and $10,000-and compare it to the total amount of your non-priority unsecured debts.

If your disposable income is less than 25% of the total of those debts, there is no presumption of abuse, and you therefore qualify to file under Chapter 7. Just as before, you will have the opportunity to show special circumstances that justify the inclusion of additional expenses.

Means Test Summary

In short, the means test works like this:

1. Compare your monthly income to the state median:

If your income is at or below the state median, the presumption does not arise and you "pass" the means test; * If your income is above the state median, go on to calculate your disposable income for the upcoming five year period. * 2. Calculate your disposable income over the upcoming five years: * If that number is below $6000, the presumption does not arise and you "pass" the means test; * If that number is above $10,000, the presumption does arise, and you can file under Chapter 7 only with a showing of special circumstances; * If that number is between $6000 and $10,000, calculate 25% of your outstanding unsecured, non-priority debts. * 3. Multiply your outstanding unsecured, non-priority debts by .25: * If your disposable income over the next five years (as calculated in step 2) is greater than 25% of your unsecured, non-priority debts, the presumption arises and you can file under Chapter 7 only with a showing of special circumstances; * If your disposable income over the next five years (as calculated in step 2) is less than 25% of your unsecured, non-priority debts, you "pass" the means test and can file under Chapter 7. Even if you've passed the means test, you should know that your bankruptcy trustee can still throw your case out for abuse if he deems that your particular case warrants it. In any case, your bankruptcy lawyer can give you more specific advice about what kinds of circumstances might cause a trustee to challenge or dispute your bankruptcy case. Talk to a Bankruptcy Lawyer For More Answers to Questions about Chapter 7 Bankruptcy! If you have any other questions about the Chapter 7 means test, feel free to contact us. Before Filing a Chapter 7 Bankruptcy Petition

• 8 Years Before: A minimum of eight years must pass between petitions under Chapter 7 of the U.S. Bankruptcy Code. You may be eligible to file Chapter 7 just six years after a Chapter 12 or 13 discharge, depending on your repayments.
• 1 Year Before: Any attempts at hiding or destroying assets in an attempt to
  protect them from creditors, as well as any payment in full to a creditor (such as a family member or friend) within one year of filing Chapter 7, will make you ineligible for this type of bankruptcy protection. Any property/assets you tried to get rid of could be collected and used to repay your creditors.
• 180 Days Before: In this time period, you must receive a Credit Counseling Briefing from an accredited nonprofit budget and credit counseling agency. This is one of the requirements introduced by the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005.
• 90 Days Before: You must live in the state where you want to file for at least 90 days to gain eligibility. Further, repayment of debts to family members or friends is considered "unlawful preference," and is not permitted. Certain debt incurred in this period (e.g. for acquiring luxury goods) is considered non-dischargeable by the bankruptcy court.

Your Case Is Filed with the Court

When your bankruptcy lawyer files your paperwork with the court, your Chapter 7 case officially begins. You can expect the following three things to happen at the time your case is filed:

1. The automatic stay goes into effect, halting all collection actions against you. This means that you're protected from repossession, garnishment, foreclosure and lawsuits.
2. Everyone you owe money to (your creditors) receives notice that you've filed Chapter 7 bankruptcy.
3. A bankruptcy trustee is assigned to your case. Your trustee, who works for the federal government, is responsible for reviewing your petition and scheduling the meeting of your creditors.

Your Chapter 7 Case: the Next Six Months

After filing your Chapter 7 petition, your case should move pretty quickly, but you'll still have many steps to complete before you can get your discharge.

• 15 Days after Filing: Within this time, you'll have to file schedules detailing your debts, assets, expenses, income and statement of affairs. Also within this time, the court will mail a Notice of Commencement of Case to all your creditors. The Notice will include the date for the Meeting of the Creditors and the deadline for creditors to object to any debts listed in your case.
• 30 Days after Filing: Within this time, you'll have to file your Statement of Intention, which details how you intend to handle collateral you have for loans. In other words, you'll have to report whether you plan to reaffirm secured debts (like that for your car), redeem your property or surrender it. You must serve a copy of this Statement on your trustee and all creditors. You then have 45 days to take the actions outlined in the Statement.
• 6 Weeks (42 Days) after Filing: The Meeting of the Creditors takes place. You'll need to get a copy of your most recent tax return to your trustee and any creditor who requests it a week before the meeting. You're required to attend the meeting and testify to the truth of the statements in your Chapter 7 petition. Usually, these meetings are quick and informal affairs.
• 45 Days after Filing: Within this time, you need to file a statement with a certificate from your lawyer verifying that you were told about the bankruptcy chapters available to you. You'll also need to file a statement of any income from your employer within 60 days of your filing, an itemized receipt of your monthly income and an estimate of any increases in income/expenditures you expect in the next 12 months.
• 30 Days after the Meeting of the Creditors: During this time, your trustee can object to any exemptions you claim in your petition. Similarly, your creditors can object to any debts you listed.
• 60 Days after the Meeting of the Creditors: During this time, your creditors can object to the discharge of any debts listed in your petition and schedules. Generally, you can expect objections if you engaged in questionable or illegal activity at some point in relation to the debt.
• 90 Days after the Meeting of the Creditors: Creditors (except government entities) have this time to furnish evidence to support their objections to discharges.
• 180 Days after the Meeting of the Creditors: Government creditors must submit their evidence within this time.

Any questions? Contact us.

The Automatic Stay

One of the most immediate-felt effects of Chapter 7 bankruptcy protection is the automatic stay provision, which prevents creditors from collecting debts from you.

Under the automatic stay, creditors are not allowed to call you or send you collection letters. They also can't take or continue any legal action against you or repossess your car or other assets. And-even if a garnishment order has been issued-the automatic stay stops garnishment of your wages.

What Does the Bankruptcy Automatic Stay Stop?

Stop Foreclosure: If your home is undergoing foreclosure proceedings, the automatic stay will stop the foreclosure action. Though Chapter 13 bankruptcy is the best option for stopping foreclosure of your home, a Chapter 7 bankruptcy filing will also temporarily halt foreclosure action in most cases.

Stop Utility Shut-Offs: One of the worst situations you can find yourself is in to be forced to live in an apartment or house with no lights or gas. If your lights and gas have been disconnected by the utility company, the automatic stay in your bankruptcy petition will require the utility company to reconnect your home to their utilities. Sometimes the utility company will require a small deposit within a reasonable time after you file for bankruptcy relief-if you cannot provide the deposit, they may be able to turn off your lights and heat after the bankruptcy filing.

Stop Repossession: If you have an automatic stay, creditors or repossession agents cannot take your car. However, in this case, the automatic stay is just a temporary solution. In order to keep the car on a permanent basis, you will have to reaffirm your car loan or return the car in your bankruptcy filing.

Stop Lawsuits/Garnishments: If you file for Chapter 7 bankruptcy, your automatic stay will stop all lawsuits and wage garnishments, effective immediately from the time that you file your petition. And, on top of getting your full pay check, if your debt is dischargeable, you will likely be able to eliminate the entire outstanding debt in bankruptcy.

Stop Collection of SSI/Food Stamps/Public Benefit Overpayments: Public assistance agencies can collect any overpayment that they may have mistakenly issued to you in the form of SSI or food stamps. If this overpayment is being collected, the automatic stay will stop that process. Also, if your debt is discharged, this overpayment debt will be eliminated, unless the government agency can prove that it arose from fraud.

Stop Some Tax Levies: An automatic stay can protect you from some IRS processes, including a tax levy or property seizure, for any debt you might owe. However, the IRS still has authority to audit you, require filing of tax returns, assess a tax liability and require payment of the assessment.

What Can't Be Stopped with the Bankruptcy Automatic Stay?

Criminal Proceedings: The automatic stay will not stop a criminal action from proceeding. If you are facing charges of driving under the influence, drug charges or another other criminal charge, filing bankruptcy cannot prevent the state from prosecuting you or imposing fines and court costs. On the other hand, if your criminal charge can be separated into criminal and debt liabilities, the court may be able to stop a creditor from collecting the debt. Regardless, it is a smart idea to consult a local criminal defense attorney for a consultation if you've been charged with a crime.

Child Support Actions: The automatic stay is not able to stop a lawsuit against you seeking to establish paternity or to establish, modify, or collect child support or maintenance.

How Long Does the Bankruptcy Automatic Stay Remain in Effect?

If you've filed a Chapter 7 bankruptcy petition and received an automatic stay, it will remain in effect until:

• you complete the bankruptcy and receive a discharge;
• the bankruptcy judge lifts the stay at the request of the creditor; or
• the property you wish to protect is no longer part of the bankruptcy estate.

In exceptional circumstances, the automatic stay will not be automatically granted when you file your bankruptcy case, or may require a motion from your bankruptcy lawyer to remain in effect. This most often applies to those who have filed one or more other bankruptcy cases recently. However, a bankruptcy attorney will know whether or not these restrictions might apply to your bankruptcy case.

Whatever your current financial situation and interest in Chapter 7 Bankruptcy, an experienced bankruptcy attorney can be a useful resource for advice and up-to-date information for consumers. If you have any questions, feel free to Contact us.

Chapter 7 Bankruptcy COURT FILING Fees

Bankruptcy filing and miscellaneous fees listed below are current as of August, 2007. Fees may be subject to change, and upcoming changes will be announced at the website of the U.S. Bankruptcy court, which you can visit by clicking here.

The fees listed below are statutory filing fees, payable to the bankruptcy court. These figures DO NOT include attorney fees, which vary depending upon location, the complexity of your case, and a variety of other factors.

• Chapter 7 Filing Fee: $299
• (Discharge of most unsecured debts)
• Chapter 13 Filing Fee: $274
• (Structured partial repayment plan for debtors who want to keep assets like homes)
• Conversion Fee: $15
• (to change a Chapter 13 case into a Chapter 7 case)
• Amendment Fee: $26 per amendment
• (if you have to make changes to certain documents after initial filing)

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