Most people who are interested in filing bankruptcy are looking to file a Chapter 7. That's because it's the easiest, quickest and least expensive, in terms of attorney fees, form of bankruptcy and usually accomplishes all or most of what they are trying to do by filing bankruptcy, specifically, get rid of debt as quickly and easily as possible. A Chapter 7 bankruptcy starts with the filing a petition with the Bankruptcy Court. This petition should implicitly state that all or most of the petitioners' monthly income is consumed by their monthly living expenses. More specifically, after rent (or mortgage), food, clothing, utilities, car payments, insurance and any and all other normal and necessary monthly expenses of living are paid, there is little or nothing left. The petition also will show that the petitioners have significant debt, whether they are in the form of or any combination of credit cards, medical bills, personal loans or any other type of debt. Because there is little or no income to pay this debt after the petitioners pay their regular monthly expenses, the petitioners are unable to pay this debt. As a result, they are filing the Chapter 7 in order to eliminate the debt.
In order to be eligible to file a Chapter 7, the petitioners must pass something called the 'means test'. This is a test to see if the petitioners actually should have any money left over at the end of the month after their bills are paid. The 'means test' involves a complicated formula and is made up of 2 parts. If the petitioners pass either part, they are eligible to file a Chapter 7. These tests are based upon certain expenses that are particular to the petitioners and other expenses which are pre-determined for the petitioners depending upon their family size and the state and county in which they reside. The tests are also based upon the petitioners' income over the past six months. For instance, if the petitioners are trying to determine if they are eligible to file in July, their income from January through June is used to make this determination. As such, if income and certain expenses change from one month to the next, the numbers to determine eligibility change with them So if the petitioners are not eligible to file in one month, they may be eligible to file in the next month and visa-versa.
Once we have determined that the petitioners are eligible to file a Chapter 7, we must determine if the petitioners will lose or are likely to lose some assets if they file a Chapter 7. This is because in consideration for filing a Chapter 7, the court appoints a 'Chapter 7 trustee' who has the right to take from the petitioners and sell certain assets belonging to the petitioners. These assets are called 'non-exempt" because under law, the petitioners have the right to exempt or prevent certain assets from being taken by the Chapter 7 trustee. As a result, in order to determine whether or petitioners would lose or potentially lose any assets, we would have to carefully go through their assets and their respective values.
If the petitioners pass the means test and we conclude that they are not likely to lose any significant assets, they are prime candidates to file a Chapter 7. If you are interested in filing a Chapter 7, give Kinzer & Musikar a call at (631) 321-4444 to make a free, no obligation appointment at our Deer Park office, conveniently located at 2061 Deer Park Avenue (Route 231) approximately 1 mile south of Exit 51 of the Long Island Expressway and approximately 2 miles north of Exit 39 of the Southern State Parkway.