Any debt-burdened individual may petition for either Chapter 13 or Chapter 7 bankruptcy. Although the majority of debtors prefer the immediate relief provided by a Chapter 7 petition, certain requirements must be met to qualify. First, the debtor must calculate his or her average earnings for the six months prior to filing the petition and compare them to the state's median income using the means test. This is the initial step because, in actuality, only those with incomes lower than the median are eligible to file for Chapter 7 bankruptcy.
If, however, your income is significantly above the median, additional calculations are required to determine your eligibility for liquidation procedure. Step two of the means test is calculating the debtor's available income for a five-year repayment plan. It is calculated by subtracting the debtor's income from his or her expenses and then multiplying the result by 60. Over a five-year period, a disposable income of $10,000 or more disqualifies an individual from filing for Chapter 7 bankruptcy.
In cases where individuals earn more than the median but cannot afford the $166.67 monthly debt payment, they must take the final portion of the test to determine if Chapter 7 is a viable option. This is true for those with a monthly available income between $100 and $166, when compared to 25% of the total debt due in five years. If the available income is between $6,000 and $10,000 and less than 25% of the debtor's total debt, then the debtor is eligible to file for Chapter 7 bankruptcy. If however the calculated available income exceeds 25% of the debt, Chapter 13 is the only option.
If your income qualifies you for a Chapter 7 bankruptcy petition, your next step might be to hire an attorney. Upon filing, the debtor is typically required to submit a sworn inventory of creditors and a financial report of assets and liabilities. In addition, the debtor must submit a schedule of current income and expenses, a financial statement, and a list of exempt properties. The statement of intent concerning liabilities secured by property of the created estate is possibly the most essential document to prepare in terms of satisfying creditors. The petitioner is promptly granted relief through the automatic stay upon filing.
From now on, cooperation with the trustee is the most important factor.""
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