R. BRENT ENGLISH
Attorney at Law
BANKRUPTCY
R. Brent English, Attorney @ Law
1178 Broadway
Suite 3503
New York, NY 10001
Phone: 212-962-3195
Fax: 646-390-8021
Free Initial Consultation
Evening and Weekend Appts
Call 212-962-3195
Chapter 7 Bankruptcy - The Facts
Chapter 7 bankruptcy relief, sometimes referred to as “straight bankruptcy,” provides for simple debt liquidation. Chapter 7 bankruptcy essentially grants the debtor a discharge which releases the debtor from personal liability for his or her debts. A joint Chapter 7 filing is limited to married couples. A husband and wife may file a joint petition or individual petitions.
In exchange, the debtor’s non-exempt, unencumbered assets, if any, are liquidated for the benefit of the creditors. The person who performs the liquidation of assets is called a Chapter 7 trustee. Many Chapter 7 bankruptcies are “no-asset” cases meaning that the debtor has nothing of monetary value which can be liquidated for the benefit of creditors. Note that only individuals actually receive a discharge. Generally, Chapter 7 debtors that are not individuals (such as partnerships or corporations) simply undergo a liquidation of their assets and must be dissolved or have their existence terminated in accordance with applicable law.
Before filing for Chapter 7 bankruptcy, the debtor must qualify through a Chapter 7 “Means Test” introduced in the latter part of 2005. The Means Test begins with a median income comparison. The debtor’s monthly income is compared to the median income in the debtor’s home state for a family of the same size. If the debtor’s income is at or below the median income, the debtor will usually qualify for Chapter 7 bankruptcy. If the debtor’s income is greater than the median income, a second step of the Means Test is triggered.
Calculating disposable income and unsecured debts is the next step of the Chapter 7 Means Test. If disposable income over the following five years is less than $6,000 ($100/month), the debtor “passes” the means test and may file for Chapter 7. If disposable income during this five year period exceeds $6,000 but is below $10,000, the debtor may still be able to file for Chapter 7 bankruptcy protection, depending upon permitted expenses.
The law requires that the debtor receive Credit Counseling from a certified credit counseling agency before filing a Chapter 7 petition. The agency will describe financial management and budget analysis, and will also talk about alternatives to bankruptcy. Although there are some hardship exceptions to this requirement, most debtors must receive this briefing or risk dismissal of the bankruptcy case.
