Chapter 7 is a liquidation bankruptcy. If you file for Chapter 7, you are allowed to keep a certain amount of property under the exemption laws which creditors cannot get and you can keep.  If you have more than that amount and type of assets, the trustee who is appointed to monitor your case and many others, may sell those assets to obtain money to pay your creditors. Most people receive a discharge of debt in four to five months and don’t have to commit future income to pay back debt. But if you are behind on a mortgage or other secured debt, you can’t use a Chapter 7 filing alone to save your house or your car and, in many cases, you can’t continue to operate your business after you file.  If these are your objectives, you may want to consider a Chapter 13 or Chapter 11 bankruptcy.

Do You Qualify for Chapter 7

While most people considering bankruptcy still do qualify to file a Chapter 7, it is not always automatic.  If your debts are primarily consumer (not business) debt and your income is above the median income for your household size in Florida, we then consider your expenses (some actual, but some are IRS and US Census Bureau standards).  Looking at your gross income and these expenses, we determine if you “pass” the means test to be eligible for filing Chapter 7.  The means test is only applicable to individuals.  For business entities such as corporations, LLCs and partnerships, or individuals with more than 50% of their debt being non-consumer debt, the means test does not apply.

The Bankruptcy Means Test

The means test is a formula which was created by Congress to avoid substantial abuse of the bankruptcy laws.  It is designed to determine whether your income, less these applicable expenses, is sufficient to support a meaningful payment to creditors under Chapter 13.  If after deducting allowed expenses (some actual, but some determined by IRS and US Census Bureau figures), you have no money remaining to pay creditors, or if the payment you could make is below a certain threshold, you may still be eligible to file Chapter 7.

Below Median Income or Primarily Business Debts – Means Test Does Not Apply

If your income is below the Florida median income for your household size, or if your debts are primarily business debts, you automatically qualify for Chapter 7.

Attorneys Fees Paid in Full Before Filing

In Chapter 7, attorney’s fee not paid in full prior to the filing could be discharged as part of the bankruptcy process.  Therefore, Chapter 7 attorney’s fees are collected in full before the bankruptcy case is filed