Chapter 7 Bankruptcy Basics
Chapter 7 bankruptcy is a practical solution for solving debt problems. Successfully going through a chapter 7 will result in a discharge of your personal obligation to debts that you have. To get that discharge you will have to show the Court that your household qualifies under the bankruptcy means-test, that your monthly expenses exceed your monthly income, and disclose all of your assets. An experienced attorney can help you prepare an accurate filing with the Court and know exactly what other documentation you will have to present.
The bankruptcy means-test is the calculation that the Bankruptcy Court uses to determine if someone has made below the average median income for your household size. It is based on IRS the average incomes for your region and household size. For Louisiana those figures can be found through the Department of Justice website and are updated regularly. This is the first test to know if a Chapter 7 bankruptcy is available for debt relief. This is why it is common for bankruptcy attorneys to ask their clients for their last 6 months of pay statements so a determination on the means-test can be made.
If the means-test is passed then another requirement is to detail your monthly income and expenses to show that you do not have any disposable income. Detailing all of your expenses starting with your housing, all the way down to transportation needs is necessary to show that in total your monthly expenses exceed your monthly income. The purpose is to show that after you pay all of your bills you do not have any money left over to pay your debts.
Additionally, it is necessary to disclose all of your assets to the Bankruptcy Court. The Bankruptcy Court needs to know if there are any nonexempt assets which can be collected by the Court. Often this review is handled by a bankruptcy trustee assigned by the Department of Justice at a 341 Meeting of Creditors. The review is made to see how much your assets are worth and if there is any that could be sold to satisfy some of your debts. The most important factor here is understanding the exemptions allow you to protect your assets and property up to a statutory limit. If all of your assets qualify as being exempt then a chapter 7 is likely to be successful.