Chapter 7 used to be the most common form of bankruptcy for individuals or married couples. If you are
an individual with consumer debts, you must take a means test to determine whether you are eligible to
file for Chapter 7 bankruptcy. This test compares your personal income with the median income in your state.
If you are below the median income for your state, you satisfy the means test. If you are above the median
income, your disposable income will be calculated. If the means test prevents you from being eligible for a
Chapter 7 bankruptcy, you will have to file for Chapter 13 or Chapter 11.
In a Chapter 7 Bankruptcy a court-appointed trustee sells your non-exempt assets and uses the money to
pay your creditors. All remaining debts are then discharged. Chapter 7 does not usually discharge
student loans, taxes and tax fees and penalties, alimony or child support, secured debts, or criminal fines.
One of the benefits of filing a Chapter 7 bankruptcy is that an automatic stay is immediately issued. This stay
prevents creditors from collecting debts and repossessing your property. There is a hearing after you file
during which your creditors can ask you questions. A trustee is appointed to collect and sell
your non-exempt assets and divide the proceeds among your creditors. Once you have completed this process, all
of your remaining dischargeable debts are discharged
Chapter 7 bankruptcies tend to be relatively straight forward, and we often charge a set fee to handle the entire
matter rather than an hourly rate.
Chapter 13 is usually used by individuals and sole proprietorships who do not qualify for Chapter 7 or who do not
want to have all of their non-exempt assets liquidated. It allows the debtor to keep his property, but it requires
payments to be made on a schedule over three to five years. The debtor submits a restructuring plan to the court
that details how much they can pay on a monthly basis for three to five years. The court appoints a trustee who is
paid a set amount by the debtor each month. The trustee then distributes funds to creditors. If the debtor meets
the requirements of the plan, his remaining debts are then discharged.
The main requirement for filing Chapter 13 is that you have enough regular income to pay for both your monthly
expenses and the payments required under the restructuring plan.
The short answer is: not necessarily. Bankruptcy courts are used to having people file for bankruptcy on their own
behalf. Having said that, for most people, bankruptcy is not a step to be taken lightly. The process can be cumbersome
and you may lose property or other rights if you do not know the law. The peace of mind that comes with knowing that your
bankruptcy was handled correctly is well worth the relatively small extra expense of having an attorney handle it for
you. If you want to research on your own before speaking with an attorney, try the resources below.
U.S. District Bankruptcy Courts
The Judicial Branch's official site for the bankruptcy courts; it provides a description of the different bankruptcy chapters
as well as a basic walkthrough of how to file.
U.S. Bankruptcy Code
The U.S. House of Representatives' official site for the Bankruptcy Code.
The Fair Credit Reporting Act
The Federal Trade Commission's official site links to the Fair Credit Reporting Act. This act limits what creditors
can do in attempting to collect from you.
