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

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??

Category: Bankruptcy
Date: 04/07/2025
State: Utah

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

What not to do before filing Chapter 7?

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.

Do you have to close all credit cards in Chapter 7?

You are not required to close all credit cards when filing for Chapter 7 bankruptcy. However, you must list all your debts, including credit cards, in your bankruptcy petition. After filing, it’s advisable to stop using credit cards to avoid incurring new debt, as this could complicate your bankruptcy case. Consult with a bankruptcy attorney for guidance tailored to your situation.

Do you have to be behind in payments to file Chapter 7?

No, you do not have to be behind on payments to file for Chapter 7 bankruptcy. Your eligibility is primarily based on your income and ability to repay debts, assessed through a means test. However, being behind on payments may indicate financial distress, which can support your case for bankruptcy. It's important to evaluate your overall financial situation before proceeding.

Should I close credit cards before filing Chapter 7?

You do not need to close your credit cards before filing for Chapter 7 bankruptcy. However, it is generally recommended to stop using them to avoid accumulating new debt. When you file, you must disclose all credit accounts, and the bankruptcy process will address these debts. For specific advice, consult with a bankruptcy attorney.