What Criteria Is Needed to File for Bankruptcy?

Means Test

The means test was established with the 2005 rewrite of the nation's bankruptcy laws. The means test establishes a debtor's ability to repay debt, thereby assessing his eligibility for Chapter 7 relief from debt. The test focuses primarily on the debtor's income. As an example, a debtor with a household consisting of four people, who contemplates bankruptcy after March 15, 2011 in the state of California, can make $78,869 annually, and still qualify for relief under Chapter 7, with no additional requirements. Even if the debtor does not qualify for Chapter 7, he may move forward with Chapter 13 filing, which requires repayment of debt under a strict program monitored and enforced by the bankruptcy court.

A person who files for protection under the nation's bankruptcy code must provide the court with evidence of his debt. When the debtor files for bankruptcy protection, he must attach a list of all income and expenses; provide a schedule of assets and liabilities; and prepare and file a detailed listing of all his financial affairs. If the action is primarily the result of consumer debt, the debtor must file evidence of income from the two months immediately preceding the bankruptcy filing. The court also requires any documentation that certifies the debtor's monthly net income. He must also explain any increase or decrease in income he contemplates in the wake of the bankruptcy filing.

Under the terms of the new bankruptcy legislation, a debtor who files because of consumer debt must also complete credit counseling and debt management courses, which are available online. In advance of the actual filing, the debtor must attend and complete a court-approved credit-counseling course, and file the certificate of completion when he files his bankruptcy petition. After the meeting of the creditors and before the discharge of debts, he must also attend and complete a financial management course. He must file the certificate of completion with the court before he receives the debt discharge.

When the bankruptcy law was overhauled in 2005, it made it a requirement that the filer provide his federal income tax return for the last tax year, and, if his taxes were not paid, he must do so before filing for bankruptcy under Chapters 7 or 13. Another alteration was the requirement that a person filing for Chapter 7 bankruptcy release must endure an eight-year hiatus between filings.

If a debtor plans to file bankruptcy without the assistance of an attorney, he should know that the officers and trustees of the bankruptcy court may not answer legal questions, nor may they offer legal advice. Contact a professional for guidance when considering the filing of a bankruptcy petition.