When you file Bankruptcy under Chapter 7, it is most commonly called liquidation. This is the most common type of Bankruptcy, and it involves the appointment of a trustee who will collect the non-exempt property of the debtor, and then sell it and distribute the proceeds to their creditors. Typically, when you file a Chapter 7 Bankruptcy, it will wipe your debt away and give you a clean slate. Many times people or businesses that file Chapter 7 will not have to pay any of their creditors back.

Under the new Bankruptcy law, the first step in figuring out whether or not you can file for Chapter 7 is to measure your monthly income against the median income in the state you live in. If your income is equal to or below the median income, and you don’t have more equity in your home than is allowed by your state, then you can file for Chapter 7. If you have too much equity in your home, then you will not be allowed to file Chapter 7. If your income is above the median income in your state, then you have to go over your monthly expenses in what is called a “means test”. A means test uses a list of allowable expenses that are published by the IRS. The calculations used in the means test will take into account your average monthly income over the last six months before you try to file for Chapter 7. After your income and allowable expenses are factored into your means test, if you have less than $100 left at the end of the month, then you will be allowed to file Chapter 7, but if you have more than $100 left at the end of the month, then you will not be allowed to file Chapter 7.

If you have a steady income each month, then you will most likely have to go through a review to find out if you qualify for a Chapter 7 Bankruptcy. Sometimes, during a Chapter 7 review, it will be recommended that you do consumer credit counseling (CCC) first for a minimum of 6 months before you will be allowed to file Chapter 7. According to the National Foundation for Credit Counseling, close to 80% of people who apply for Chapter 7 are unable to comply with the rigid requirements set forth, and end up exploring Chapter 13 Bankruptcy instead.

At S.J. Packman & Associates, before we make any recommendations, our attorneys, certified debt specialists, and paralegals, are trained to ask the right questions to find out about your specific situation. Based on your current income and your financial hardship, we will determine which course of action will work best for you. We do not only offer one path, as there is no one process that can solve everyone’s needs. We will take our time with you and help evaluate what your best course of action should be. Call now and one of our advisors will be there to get you started on your path to financial freedom. There is no obligation to enroll, so don’t delay.