Qualifying for a Chaper 7
Joliet Illinois Bankruptcy Lawyers & Attorneys
Jesse Barrientes: Okay. So you said Chapter 7 is for someone with not a whole lot of assets.
Dave Siegel: Right. Chapter 7 is basically a fresh start. So if someone has significant assets, they’re not going to be able to avail themselves with the Chapter 7 bankruptcy laws and eliminate a lot of their miscellaneous debt because the theory is, if you have assets you can liquidate your assets and pay off your creditors and not file bankruptcy. So bankruptcy is really Chapter 7 is for somebody in Joliet who does not have significant assets and really needs that fresh start. They’ve hit rock bottom. They don’t have a house with any equity. They don’t have a vehicle with equity. And they’re just strapped with unsecured debt, which is credit cards, personal loans, medical bills, utility bills. Things like that.
Jesse Barrientes: Well, what if I don’t have any property and any equity but I make for one individual $55 thousand a year. What about that? Am I still going to be able to do Chapter 7?
Dave Siegel: Most likely not.
Jesse Barrientes: How come?
Dave Siegel: Because you make more than the average person in the state. You probably have the ability to repay all or a portion of your debt over the next three to five years if you got on a budget. Because if you’re making $55 thousand a year and you don’t have any significant assets, where is your money going?
Jesse Barrientes: That’s the question. Show me the money. Where’s the money? I don’t know.
Dave Siegel: Well, you would have to show the court where it’s going and if you can’t satisfy the bankruptcy court that you actually have these legitimate expenses – you know maybe you have a medical condition, maybe you have high utility bills. Maybe there’s some other reason. Student loans, IRS debt. But if you’re making $55 thousand a year as a single person and you can’t substantiate what that income is going towards, then you have a budget issue. And the only way you can avail yourself of bankruptcy is if you don’t have that budget issue.
Jesse Barrientes: Well, is there – is this kind of a means test? Is there a certain amount of money that I can make before I’m presumed not to be able to do a Chapter 7?
Dave Siegel: Yes. There’s actually a two prong scenario to be able to quality for Chapter 7. The first is you have to be under the state median for a family of your size. If you’re over that number, you still may quality but you must satisfy this strict means test which is a mathematical formula using IRS guidelines for the amount allowed for the expenses. If you still quality – if you pass that test, you can still do a Chapter 7 if you’re making more than the state median. The second prong, though, which is very important is you must not have available money per month. Because even if you qualify under the median and you still have available money per month, the court is going to require you to do a Chapter 13 and repay your creditors over the next three to five years.
Jesse Barrientes: What if I have $25 available after the allowable minimal expenses?
Dave Siegel: Well, $25 is probably not enough to sustain a repayment plan over the next three to five years, but if you have over $166 a month, if you can pay more than 25 percent of your debt over the next three to five years, Chapter 7 will not work for you. Chapter 7 is really for someone who cannot afford to pay their bills and they don’t have significant income nor significant assets.
Back to Joliet Illinois Bankruptcy Lawyers & Attorneys
Chapter 7
What’s needed to file a Chapter 7 case?
Stay on creditors during a Chapter 7 case
Mistakes made in a Chapter 7 case
Listing creditors in a Chapter 7 case
Credit counseling classes in a Chapter 7 case
Notice to creditors in a Chapter 7 case
There is life after bankruptcy
Chapter 13
Saving your home with a Chapter 13
Stopping a sheriff sale using Chapter 13
Converting to a different chapter from Chapter 13
