Choosing to file bankruptcy with the help of a Chapter 7 bankruptcy attorney in St. Louis is a hard choice to make — but it’s a decision thousands of Americans just like you have to make every single day.
In fact, bankruptcy in general is a lot more common than you might think. It’s in no way something to be ashamed of or to be embarrassed about, because plenty of people file bankruptcy. In 2013, an incredible 1,071,932 bankruptcies were filed across the U.S. About 8,980 of these were Chapter 11 bankruptcies, and another 333,626 were Chapter 13 bankruptcies. However, some 728,833 individuals chose to file a Chapter 7 bankruptcy, making this form of bankruptcy the most common type of bankruptcy in the country.
What is Chapter 7 bankruptcy — and why do people file it?
During a Chapter 7 bankruptcy, an individual discharges all of his or her applicable debts, absolving any need to repay these debts to creditors. Filing Chapter 7 is also a fairly quick process, with these bankruptcies lasting no more than three to six months or so on average. Following a Chapter 7 bankruptcy, an individual will gain the financial freedom and peace of mind needed to begin building a strong, healthy credit history that makes it easy to make large purchases like cars and homes.
Another benefit of choosing to file bankruptcy? As soon as you hire the best Chapter 7 bankruptcy attorney St. Louis has to offer to initiate your filing, you receive instant protection from those constant, harassing phone calls from debt collectors and creditors — another huge reason why many people in overwhelming debt turn to bankruptcy.
Surprisingly, the vast majority of people who file bankruptcy didn’t resort to bankruptcy because their spending has gotten out of control. The popular image of a shopaholic who can’t stop using credit cards to pay for expensive clothes, makeup or other luxury goods is actually quite rare in real life.
The biggest reason why people seek out the help of a Chapter 7 bankruptcy attorney is actually unpaid medical bills, believe it or not. An amazing 62% of all consumer bankruptcies stem from medical expenses, and medical-related bankruptcies affected some two million Americans in total throughout 2013 alone. This is largely because it’s nearly impossible to plan or save one’s money for a medical emergency — and the costs of seeking the medical care one needs are often astronomical, even with health insurance. As a result, few people are equipped to handle the costs of staying healthy, and therefore go bankrupt.
The second most common factor leading to bankruptcy is unexpected job loss; when you’re laid off or fired without warning, you will very likely struggle to pay your bills, racking up debt quickly. Bankruptcy is a common way out for people who have unexpectedly fallen into debt; going bankrupt can happen to anyone, at any time. If you think a Chapter 7 bankruptcy would help you, you shouldn’t be afraid to ask for bankruptcy help that will move your filing along.
Am I eligible to file Chapter 7 bankruptcy?
It’s clear to see that many popular conceptions associated with bankruptcy aren’t always true. If you think this form of bankruptcy is the right choice for you, and that a St. Louis bankruptcy attorney will be able to help you recover from the pressures of overwhelming debt, your first step is to determine whether or not you meet the eligibility requirements for a Chapter 7 bankruptcy.
There are a number of criteria one must meet in order to be eligible for Chapter 7 bankruptcy. Perhaps the biggest one is income. Despite prevalent stereotypes surrounding bankruptcy, you don’t have to be penniless in order to meet the income requirement. Many people use a bankruptcy “means test” to help determine whether or not their income is low enough to meet Chapter 7 eligibility requirements.
How the Chapter 7 means test works
The Chapter 7 means test was first designed to make sure the only people who file Chapter 7 bankruptcy are those who truly have no means to pay their debts. The formula weeds out hopeful filers who have high incomes from being able to conveniently cast off their debts. Also, the means test is primarily aimed at people whose debts are mainly consumer debts — not business debts. If you have more business debts than consumer debts, you might be better served by filing Chapter 11 bankruptcy.
However, you can still have a high income and be eligible to file Chapter 7 bankruptcy. If you face expenses such as a high mortgage, car loan or high taxes, you may still be able to qualify, depending on the formula’s outcome.
If you do a quick web search for “bankruptcy eligibility calculator,” you’ll bring up countless results. One of the best online bankruptcy means calculators can be found at legalconsumer.com by clicking on its Bankruptcy Means Test Calculator. The test closely mirrors Official Form 22A, the means test you will complete when you actually begin to file bankruptcy with your Chapter 7 bankruptcy attorney.
This calculator factors in the average cost of living in your state, county or geographic region to help determine your eligibility. That means you won’t have to spend time looking up specific income and cost-of-living figures for your area. All you’ll need to provide is your ZIP code and some information about your income and personal expenses, such as food, housing and transportation costs, over the last six months.
In Missouri, the median income is currently $45,321. If your income is less than this, you automatically pass the means test and can move forward with the bankruptcy timeline immediately. If you earn more than your state’s median income, however, the amount of disposable income you have to put toward repaying your debts mustn’t exceed a certain amount for you to still be eligible. Your Chapter 7 bankruptcy attorney will be able to explain more about this eligibility process to you.
Other eligibility requirements for Chapter 7 bankruptcy
Meeting the Chapter 7 income requirement is just one piece of the full bankruptcy eligibility puzzle — and just because you pass the Chapter 7 means test doesn’t necessarily mean that this form of bankruptcy will be the best choice for you. The test is just an indicator of whether you can file bankruptcy, and it’s important to remember that.
Because a Chapter 7 bankruptcy will stay on your credit report for 10 years, it’s not without its consequences — additionally, you might have to give up some of your assets or possessions during your debt liquidation. However, don’t let these potential drawbacks dissuade you from consulting with a Chapter 7 bankruptcy attorney.
Here’s a look at some of the other criteria you must meet in order for a bankruptcy court to permit you to file Chapter 7 bankruptcy:
- Credit counseling
- Once you’ve passed the Chapter 7 means test, you will be required to complete a credit counseling session before you proceed further with the filing process. You will be required to get this credit counseling from a U.S. Trustee’s office-approved agency, and your credit counseling must be completed less than 180 days before you file bankruptcy.
- The purpose of credit counseling is to look over your options and determine whether or not you have alternatives to filing bankruptcy with a Chapter 7 bankruptcy attorney. During a credit counseling session, you and a credit counselor will look over your income, expenses and debts to see if there is any way you can manage your debt problem without resorting to bankruptcy. In most cases, credit counseling simply confirms that bankruptcy is the only option available to you — something you likely already knew, but it’s required that you confirm this nonetheless.
- Upon completing credit counseling, you will receive a certificate proving you’ve completed the counseling session. You’ll need to file this certificate with your bankruptcy court no later than 15 days after your initial bankruptcy filing is made to prove that you have completed the requirement. It’s important to remember that you’re not required to complete the debt repayment plan that will be outlined to you during your credit counseling session.
- Not sure where to go to complete your credit counseling requirement? Simply visit the Office of the U.S. Trustee’s website at www.justice.gov/ust/, click on “Consumer Information” and then head to the “Credit Counseling and Debtor Education” page. This page will give you a list of approved agencies in your area that offer credit counseling.
- Debtor education
- In addition to completing your credit counseling requirement, you’ll need to undergo something called debtor education, as you won’t be able to discharge your debts without doing this. This course must be completed after you file bankruptcy with a Chapter 7
- , and within 60 days of the first scheduled date for a meeting between your creditors
- Much like with credit counseling, debtor education requires you to go to an approved agency, and you’ll also be required to file your certificate of debtor education completion with the court. If you fail to do this, you run the risk of having the court close your bankruptcy case without discharging any of your debts.
- Unlike credit counseling, however, debtor education focuses more on your life after filing bankruptcy. You will learn helpful money management skills, like budgeting, that you can use for the rest of your life, as well as how to use credit and credit cards to your advantage. Debtor education is a required part of any bankruptcy filing because it gives you the skills you need to avoid another bankruptcy in the future.
- During debtor education, you will draw up a mock budget using your income and personal expenses to follow after your bankruptcy is complete — once again, you don’t necessarily have to follow this budget, but it might be helpful practice in budgeting. As long as you stick to your budget and follow wise spending and saving habits, you’ll be able to easily rebuild your credit in the years after your bankruptcy. Thousands of people are able to do this every year!
- To find an approved debtor education agency, visit the same Office of the U.S. Trustee’s page as you did with credit counseling; you’ll find what you’re looking for under “List of Approved Debtor Education Providers.”
The good news is that most people who are considering a Chapter 7 bankruptcy as their only remaining choice of action are often eligible to file. However, if you think you don’t fit the eligibility requirements for a Chapter 7 bankruptcy, you shouldn’t give up on seeking the financial solace and overall peace of mind that a bankruptcy can offer. Everyone deserves to have a fresh financial start and a second chance to establish healthy spending and saving habits — no matter one’s income level.
Chapter 13 bankruptcy is another option available to you as an individual seeking to file bankruptcy, and is more common among high-income individuals who need to get relief from their debts. During Chapter 13 bankruptcy, you create a debt repayment plan with the courts and your creditors that you will be able to pay off over a three- to five-year period.
Chapter 11 bankruptcies are another alternative to Chapter 7; however, this form of bankruptcy is typically reserved for businesses, corporations or individuals with sole proprietorships. It’s very rare for an everyday consumer to file Chapter 11 bankruptcy.
Ultimately, if nothing else, you should absolutely consult with an experienced Chapter 7 bankruptcy attorney as you move forward with your bankruptcy filing — no matter what form your bankruptcy ends up taking. A bankruptcy attorney will ensure your paperwork is filed correctly and on time, as well as offering invaluable guidance and counsel, protection from harassing creditors, and the peace of mind you’ve been looking for.
What are your thoughts on the eligibility requirements for the Chapter 7 bankruptcy timeline? Have any other questions about seeking Chapter 7 bankruptcy help with a local bankruptcy attorney in St. Louis? Feel free to let us know by leaving a comment below this article.