Chapter 7 is the most common form of bankruptcy proceeding. It is a liquidation, or straight bankruptcy, in which all of the debtor's non-exempt assets are liquidated and distributed to their creditors and the debtor is issued a discharge from their dischargeable debts. In a "noAsset" case where all of the debtor's assets are exempt property, there will not be any distribution of property to the unsecured creditors. Under the provisions of BAPCPA a debtor must now show that they are eligible to file for, and maintain, a Chapter 7 case. The burden is on the debtor to prove that their "current monthly income" is below the applicable state's "median family income" and that they are thus not subject to the "means test", or that if the means test formula is applied to their income the allowable deductions will reduce their current monthly income to a level where there is not presumed "abuse" that would make them ineligible to file for Chapter 7 relief. There are a number of documents that a debtor must be prepared to provide, in order to ascertain their eligibility to file for bankruptcy, and to complete the requirements of the process. These items include, but are not limited to: • Evidence of any prior bankruptcy filings within the last eight years; • Certificate of completion of approved credit counseling program within SIX (6) months prior to filing for bankruptcy; • Proof of income and support for the proceeding six months (and that of your spouse, if filing jointly), including copies of pay stubs from employers, unemployment income, disability, child or spousal support, etc. • Tax returns for the previous three (3) years; • Bank statements for the previous six (6) months; • Copies of all creditor notices, including credit card statements and collection letters, for the last three (3) months and at least one recent Credit Report. In addition, a debtor's "current monthly income" for the past six months must be determined. The current monthly income equals the average of the last six months of household income from all sources. If a debtor's current monthly income falls below the state's median family income (median income tables can be located at http://www.justice.gov/ust/eo/bapcpa/20110315/bci_data/median_income_table.htm), they will be eligible to file for Chapter 7 bankruptcy. If it is above that level, the "means test" must be applied to determine whether a presumption of abuse exists which would make the debtor ineligible to file for Chapter 7 relief. Call now |