Using Chapter 7 bankruptcy to get out of debt is one option you have when you can't pay off your debts. With this branch of bankruptcy, you must complete several steps before you can file and get your debts discharged. If this is something you are considering doing to find debt-relief, here are three of the main steps you must complete before and during your case.
Complete a Means Test
Chapter 7 bankruptcy is one of two main branches consumers use for debt-relief, but there is a test you must complete that will determine if you qualify for Chapter 7. If you do not qualify for this branch of bankruptcy, you may qualify for Chapter 13.
To find out if you qualify, your lawyer will complete a means test. A means test is something that compares your income to the income of the average person in your state. To complete the test, your lawyer will ask you questions about your income for the last six months. You must reveal every source of income you had during this time, including lottery winnings, child support and inheritances.
After adding up your income and comparing it to the state average, your lawyer will know if you qualify for Chapter 7. If your income is higher than the state average, you will not qualify. You will qualify, however, if your income is less than the average in the state where you live.
Go Through Credit-Counseling Courses
The second step needed in Chapter 7 is credit-counseling courses, and you must take two different courses during your case. You must take the first credit-counseling course before your attorney files your bankruptcy documents. This course helps you learn alternatives to bankruptcy and basics of budgeting.
You must take the second course after your lawyer files your bankruptcy paperwork with the court. This court teaches people how to manage their money, save money and stick with a budget.
When taking these courses, you must make sure you use a credit-counseling firm approved by your state, and your lawyer will probably give you the name of a firm you can use. You can take these courses online if desired, or you can sit through them in a classroom setting.
Attend Creditor's Meeting
The third step needed in a Chapter 7 case involves attending a meeting called a meeting of creditors. Bankruptcy courts and lawyers also refer to this meeting as the 341 hearing. This meeting is usually the only court appearance people must attend when filing for Chapter 7, and your lawyer will meet you there, so you do not have to go through it alone.
When you attend this meeting, you will meet before a bankruptcy trustee. The trustee may ask you a lot of questions about your income, assets and debts. He or she may also ask you if you have ever filed for bankruptcy before. You will be under oath during this meeting, so you will have to be honest about everything.
The goal of the meeting is simply to make sure you are eligible for Chapter 7 bankruptcy. Once you complete this meeting, the trustee will spend the next few weeks or months verifying the accuracy of your information before approving a discharge of your debts.
Going through a bankruptcy case is not always simple or fast, but it doesn't have to be complicated and time-consuming. If you want to file for bankruptcy and would like to learn more about it, contact the Law Offices of Paul McElrath. We can schedule a consultation visit for you to learn more about how bankruptcy would affect you and your unique situation.