Do I Qualify For Chapter 7 Bankruptcy?

Everyone experiences financial stress from time to time. A significant number of people experience severe financial stress. A fourth of Americans suffer from Post Traumatic Stress Disorder type symptoms because of financial stress. These symptoms include depression, anger, and sleeplessness. Mostly because of these emotional symptoms, which make it difficult to function at work, school, home, or anywhere else, financial problems rarely get better on their own, In fact, they usually get worse.

High unsecured debts, like medical bills and credit cards, are often the underlying issue. In these situations, families basically have two options. They can watch their financial situations deteriorate and hope they get better. Or, they can speak to a Chicago bankruptcy lawyer about Chapter 7 debt relief. Chapter 7 stops creditor harassment, protects your assets, and discharges (forgives) most unsecured debts.

Formal Qualifications

The aforementioned 2005 legal changes included the introduction of the means test. The big banks which lead the push for these changes hoped this requirement would make most people ineligible for Chapter 7.

But this requirement was based on false assumptions. This assumption is rooted in the 1990s. Many credit card companies and lenders believed that families bought luxury items using credit cards and never intended to pay for them.

Overspending does prompt a few bankruptcy filings. But high medical bills are the primary reason people file Chapter 7. Additionally, high medical bills usually have a spillover effect. To make ends meet, many families overuse credit cards to pay their medical bills.

Fortunately for families, the means test requirement did not have the desired effect. Families are automatically eligible to file Chapter 7 if their income is below the average amount for that state.

If you are above the cap, you may still qualify based on your actual monthly expenses and income. It is a lot more expensive to live in large urban areas than it is to live in small towns, like Hickory. Income-expense is also the basis for an informal Chapter 7 qualification. More on that below.

Additionally, all bankruptcy debtors must complete a pre-filing debt counseling course, as well as a post-filing budgeting course. These brief and inexpensive courses are usually available online.

Informal Qualifications

Formal Chapter 7 qualifications apply to all filers and are fixed by law. Informal qualifications are unwritten and vary in different jurisdictions. So, only an experienced Chicago bankruptcy lawyer is familiar with them.

As mentioned above, the debtor’s monthly income-expense balance, as listed in Schedules I and J, is usually the most important informal qualification. Typically, if the debtor’s monthly income exceeds monthly expenses, the trustee (person who oversees the bankruptcy for the judge) often questions the need and motivation to file Chapter 7. Trustees often try to steer these debtors into Chapter 13 or another alternative.

Additionally, all debtors must present proof of identity. That usually means a drivers’ license and Social Security card. Some trustees are very strict in this area. Others are more lenient. For example, they might accept a W-2 or other IRS form as proof of a Social Security number. It’s important that debtors know the rules in advance, so they are properly prepared when they meet with trustees.

Finally, trustees use different question scripts during these meetings. Your attorney can help you prepare your answers, so the meeting goes smoother. 

Count on Diligent Cook County Lawyers

No matter what kind of financial problem you are having, bankruptcy could be a way out. For a free consultation with an experienced bankruptcy attorney in Chicago, contact the Bentz Holguin Law Firm, LLC.

Resource:

forbes.com/sites/kateashford/2016/04/22/financial-stress/?sh=4ff7fd552753