Chapter 7 bankruptcy is often called a fresh start bankruptcy because it may allow those who qualify to eliminate many types of unsecured debt. If you are struggling with credit cards, medical bills, payday loans, personal loans, repossession balances, garnishments, lawsuits, or creditor harassment, Chapter 7 may provide a way to stop collection pressure and move forward. However, not everyone qualifies for Chapter 7. Before filing, you must review your income, household size, debts, property, prior bankruptcy history, and financial circumstances. A bankruptcy attorney can help determine whether Chapter 7 is available or whether Chapter 13 may be a better option.
You Must Pass the Means Test or Otherwise Qualify
One of the main qualification issues in Chapter 7 is the means test. The means test compares your household income to the median income for a household of the same size. If your income is below the applicable median, you may qualify more easily.
If your income is above the median, you may still qualify after deducting certain allowed expenses. These expenses may include housing, transportation, support obligations, and other expenses recognized under the Bankruptcy Code.
The U.S. Trustee Program explains that the Bankruptcy Code requires the means test to determine whether individual consumer debtors may obtain Chapter 7 relief. If the means test shows excessive disposable income, the case may be dismissed or converted to Chapter 13.
Recent Income Matters
The means test usually looks at your income during the six months before filing. This means timing can matter. If you recently lost a job, changed jobs, retired, had reduced hours, lost overtime, or suffered a medical setback, your current financial situation may be different from your past income.
You should not assume you are disqualified simply because you earned more money earlier in the year. A bankruptcy attorney can review the timing and determine whether Chapter 7 may still be available.
You Cannot Have a Recent Chapter 7 Discharge
A prior bankruptcy can affect whether you qualify for another Chapter 7 discharge. If you previously received a Chapter 7 discharge, you generally must wait eight years from the filing date of the prior Chapter 7 case before receiving another Chapter 7 discharge.
This timing rule is important because it is measured from filing date to filing date, not from the date the prior case closed. If you filed bankruptcy before, provide your attorney with the chapter, filing date, discharge date, and case number if available.
Your Debts Must Be Reviewed
Chapter 7 works best for debts that can be discharged. Common dischargeable debts may include credit cards, medical bills, payday loans, personal loans, old utility bills, repossession deficiencies, and certain civil judgments.
Some debts are not easily discharged. Child support, alimony, many recent taxes, criminal restitution, and certain student loans usually require special analysis. Debts involving fraud, embezzlement, willful injury, or other misconduct may also lead to creditor objections.
Before filing, you need to know whether Chapter 7 will actually solve the debt problem you are facing.
Your Property Must Be Protected
Many people fear that Chapter 7 means losing everything they own. In many consumer cases, debtors keep most or all of their property because exemptions protect certain assets. However, exemptions have limits and must be reviewed carefully.
Property to be reviewed before filing includes your home, vehicles, bank accounts, household goods, firearms, tools, retirement accounts, tax refunds, business interests, claims against others, inheritance rights, and any recent property transfers.
If property is not protected by an exemption, the Chapter 7 trustee may be able to sell it for the benefit of creditors. This is why legal review before filing is so important.
You Must Complete Credit Counseling
Before filing Chapter 7, individual debtors must complete a required credit counseling course from an approved provider. The U.S. Courts explain that individual debtors must receive credit counseling from an approved agency within 180 days before filing bankruptcy, subject to limited exceptions.
After filing, debtors must also complete a separate debtor education or financial management course before receiving a discharge.
You Must Provide Complete Financial Information
Chapter 7 requires full disclosure. You must list your income, expenses, debts, assets, bank accounts, vehicles, real estate, lawsuits, transfers, business interests, and other financial information. You must also provide documents such as pay stubs, tax returns, bank statements, mortgage statements, vehicle loan information, and creditor notices.
Leaving out information can create serious problems. Bankruptcy works best when your paperwork is complete, accurate, and honest from the beginning.
The Filing Fee Must Be Paid or Addressed
The bankruptcy court charges a filing fee when a Chapter 7 case is filed. In some cases, a debtor may ask to pay the filing fee in installments. A qualifying low-income Chapter 7 debtor may also ask the court to waive the filing fee, but fee waivers are not automatic.
Chapter 7 May Not Be the Best Option for Everyone
Even if you qualify for Chapter 7, it may not be the best chapter for your situation. Chapter 13 may be better if you are behind on a mortgage, need to stop foreclosure, want to catch up on vehicle payments, have tax debt, or own property that might be at risk in Chapter 7.
The right choice depends on your goals. Chapter 7 may be best when you need to eliminate unsecured debt quickly. Chapter 13 may be better when you need time to catch up and protect important property.
Talk to an Oklahoma Chapter 7 Bankruptcy Attorney
You may qualify for Chapter 7 bankruptcy in Oklahoma if your income satisfies the means test, your prior bankruptcy history does not prevent a discharge, your debts are dischargeable, your property can be protected, and you complete the required pre-filing steps. If you are facing garnishment, lawsuits, medical bills, credit card debt, repossession, foreclosure-related debt, or creditor harassment, speak with an experienced Oklahoma bankruptcy attorney. Call 918-637-1546 or contact EZ Oklahoma Bankruptcy to schedule a free consultation.
