Filing under Chapter 7 of the Bankruptcy Code.

The revision of the Bankruptcy Code in 2005 revamped many provisions of the Code that relate to how a debtor files and whether the debtor qualifies under a particular section under the Code.  Chapter 7 provides extensive relief to a debtor by allowing the debtor the ability to fully discharge his debt (i.e. have his debt complete removed).  However the court is stringent in qualifying the debtors who may file under Chapter 7.   Particularly of interest is the "means test" which provides for the guideline that qualifies a debtor for filings.

Means Test: The Means Test is applied to determine whether the debtor's income is above the median income as defined by the Bureau of Census and other variables.  You can find information on-line at the Bureau of Census website. Each debtor's income is adjusted by qualifying expenses.  A debtor filing under Chapter 7 must be aware that the court may file an abuse motion to disqualifying the debtor based on the such debtor's income. Likewise the Means Test is applicable to a Chapter 13 to determine the disposal income of a debor.

Automatic Stay: Upon the filing of a bankruptcy case, the Code requires that all pending litigation or debt collection be stayed until the Bankruptcy Court finalizes the debtors filing. The revision of the 2005 Act provides for such automatic stays to terminate on the 30th day after the filing of the new case. Continuances may apply however.

Conversion of Chapter 7 to Chapter 13: In the event the debtor does not qualify or its filing has been challenged, the debtor may convert its Chapter 7 filing into a Chapter 13 filing.  The conversion from a Chapter 7 to a Chapter 13 is a mechanism by which the debtor may seek relief from its debtors after its disqualification from Chapter 7.

Dischargeability: The purpose of a Chapter 7 filing is to discharge a debtors existing debt and achieve a release from liability for all debts other than those excepted from the discharge.  A debtor will however not be permitted to discharge its debts under various conditions including unwillingness to testify, hiding of assets, commited certain acts and other circumstances.  Areas of concern for discharging consumer debt relate to those where the court finds that credit card debt was incurred after the debtor became insolvent or where the intention to repay the debt was absent. Creditors may nevertheless also challenge the dischargeability of their debt.

Consumer debtors however are generally only concerned with retaining a home or vehicle that is necessary for the debtor's employment or living.