Do I need to be behind on credit cards to file Chapter 7?

Full question:

i need to file for a chapter 7 on my credit cards do i have to be behind on them??

Answer:

Your ability to repay debt affects your eligibility for Chapter 7 bankruptcy. The federal bankruptcy reform of 2005 introduced a means test to prevent individuals who can repay some debts from using Chapter 7. This means test is applied under Section 707(b)(2) of the Bankruptcy Code and assesses whether your Chapter 7 filing is considered an abuse of the code.

If your current monthly income exceeds the state median income, the means test will determine if your case is presumptively abusive. Abuse is presumed if your income over five years, after allowed expenses, exceeds either $10,000 or 25 percent of your nonpriority unsecured debt (with a minimum of $6,000). If you cannot overcome this presumption, your case may be converted to Chapter 13 or dismissed.

To qualify for Chapter 7, you do not necessarily have to be behind on payments, but your income and ability to repay will be evaluated.

This content is for informational purposes only and is not legal advice. Legal statutes mentioned reflect the law at the time the content was written and may no longer be current. Always verify the latest version of the law before relying on it.

FAQs

Before filing for Chapter 7 bankruptcy, avoid making large purchases on credit, transferring assets to friends or family, or paying off debts to friends or relatives. These actions can be viewed as attempts to defraud creditors and may lead to complications in your case. It's also wise not to incur new debts that you cannot repay, as this could affect your eligibility. Always consult with a bankruptcy attorney for personalized advice.

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