Here is the most relevant and most important question you can ask yourself in order to determine whether you can file chapter 7 bankruptcy: “What amount of money is left over each month after paying only necessary expenses?”
As soon as you arrive at this number, multiple times the number 60. This result will represent the amount of money which the court states you have the ability to pay toward your debts if you diligently attempt to pay debts during a five year period of bankruptcy (assuming a chapter 13 scenario.) If this figure is under 25% of the total amount of your debt, you likely qualify for a Chapter 7 bankruptcy. If, on the other hand, this amount of money turns out to be greater than 25% of your unsecured debts, filing chapter 7 bankruptcy could be held not to be in “good faith.”
But how does this apply in the real world of dollars & cents? Say you have 100 dollars left over each month following payment of only your required living expenses, you take that multiple of 60 to arrive at the amount of money you would pay in 60 months. $100 times 60 equals $6,000 which would be paid towards unsecured debts. Filing Ch 7 bankruptcy can reasonably held to be filed “in good faith” for situations in which your total unsecured debt to be eliminated were over $24,000. This is certainly true because in this case, $6,000 is exactly ¼ or 25% of the debt amount of $24,000.
This “good faith filing” requirement hasn’t received much news, and so many a bankruptcy attorney dallas could gloss over it and sometimes move forward with bankruptcy filings even when debt amounts are fairly modest, and where bankruptcy really wouldn’t necessarily be the correct or appropriate choice due to not meeting the “good faith filing” standard.
For cases where your total debt which stood to be eliminated or “discharged” in a chapter 7 bankruptcy were under this $24,000 debt mark, by filing to receive protection under Chapter 7, you could find yourself vulnerable based on the test of whether your bankruptcy were performed with good faith. In these cases, a trustee could recommend a closer look, and a judge could dismiss your bankruptcy or convert it into a ch 13 bankruptcy. Furthermore, paying your unsecured creditors an amount of 25 cents on the dollar for the debt owed would be held to be a successful resolution in a Chapter 13 bankruptcy debt repayment plan.
At the same time, it should be understood that Bankruptcy code doesn’t actually delineate some specific minimum debt in order to validly file for Chapter 7 bankruptcy protection. It is fascinating to note that many lawyers overlook this criteria when considering a potential new client for bankruptcy. They fail to comprehend that clients need to meet this “good faith filing” criteria in order to receive Chapter 7 bankruptcy relief.