How to Qualify for a Chapter 7 Bankruptcy in Washington

You must take a means test to determine if you qualify for Chapter 7.

Before the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 was passed, a debtor could choose to file for either Chapter 7 or Chapter 13 bankruptcy. The act was passed to prevent debtors from abusing the bankruptcy system. Abuse usually came in the form of debtors filing for Chapter 7 bankruptcy and dumping all of their unsecured debt via a quick discharge. The new laws have made it more difficult for debtors to file for Chapter 7. Your family income compared to the Washington state median income will be used to determine if you qualify for Chapter 7.

Things You'll Need

• Financial records
• Calculator

Instructions

1. Attend credit counseling with a government-approved agency at least 180 days prior to filing.

2. Reside in the state of Washington for 90 days prior to filing.

3. File a Chapter 7 bankruptcy petition. Once the petition is filed, an automatic stay will go into place, alerting all creditors to end their efforts to collect debts.

4. Attend first meeting of creditors. At the first meeting of creditors, you will meet with the bankruptcy trustee and any of your creditors who want to appear. You will swear to the accuracy of your financial records under oath.

5. Take the means test. The bankruptcy court employs a means test to determine whether the debtor is trying to abuse the bankruptcy court by filing for Chapter 7 when the debtor should really be filing Chapter 13. Compare your family income to the median family income in Washington: family of two, $64,158; family of three, $72,533; family of four, $82,716; family of five, $73,804; family of six, $67,489; and family of seven or more, $72,990 (as of 2010). If your family income is lower than the median family income for a family of the same size, you qualify for Chapter 7 bankruptcy. If not, continue with the means test. These figures change, so check the Census Bureau website prior to filing.

6. Calculate your disposable income. Deduct certain monthly expenses, as determined by the Internal Revenue Service, from your monthly disposable income. If you have more than $100 of disposable income left over per month and that $100 will pay over 25 percent of your unsecured debts over the course of five years, then you fail the means test and do not qualify for Chapter 7 bankruptcy. On the other hand, if after calculating your monthly disposable income you are left with less than $100, you qualify for Chapter 7 bankruptcy. If after calculating your monthly disposable income, you are left with more than $100, but that amount will not be enough to pay over 25 percent of your unsecured debts over a course of five years, you also qualify for Chapter 7 bankruptcy.

Tips & Warnings

• If you are unsure about the calculations, employ a reputable bankruptcy attorney.

• Bankruptcy debtors are urged to employ a bankruptcy attorney.

References

• Total Attorneys LLC: The Chapter 7 Bankruptcy Process
• Total Attorneys LLC: Know Your Chapter 7 Bankruptcy Pre-Filing Requirements
• Census Bureau: State Median Income