To qualify for Chapter 7 you must have income below the qualifying level on the Means Test. (If you’re considering Chapter 13 for an urgent matter, click here.)
Submit the quick form below to send your information to Attorney Malinda M. Pennington. You will receive a reply within 1 work day.
The Means Test determines whether you qualify for relief under Chapter 7 or if you file Chapter 13, what your plan payment will be. https://www.justice.gov/ust/means-testing
To qualify for Chapter 7 the last six months of your monthly income minus reasonable expenses (some actual expenses & some local/national standards) must show an annual income less than the “median annual income” for South Carolina.
If you don’t qualify for Chapter 7, you may want to consider Chapter 13.
In Chapter 13 the Means Test determines available “disposable income”.
Your last six months’ average income minus some of your expenses and some national/local expenses equals “disposable income”. In Chapter 13, your “disposable income” is available to pay to creditors.
When you file a Chapter 13, the creditors have 90 days (120 for tax) to file claims and after all claims are filed, your “disposable income” determines the percentage of claims paid. For example, if your “disposable income” is enough to pay 25% of your unsecured claims, your Chapter 13 plan is a 25% plan. While Chapter 13 plans always start at 1%, a plan as high as 100% is possible for high wage earners.
Why file bankruptcy at all if it’s a 100% plan? Well, the reason filing a 100% plan is still helpful is because the bankruptcy stops all legal actions, all fees and all interest on judgments. The Chapter 13 provides a definite 5 year plan to eliminate existing debt.
Be careful of transferred property, especially to a family member or friend. Transferred property may cause delay.
The key to a smooth bankruptcy is complete disclosure. (what lawyers call “good faith”).
One of the most important ways the Trustee, and the court, will assess whether you have filed your bankruptcy in good faith is by looking at property transfers prior to your bankruptcy filing date. In bankruptcy, property transfer is any transfer of value, including money, furniture, electronics, or vehicles. So, many times bankruptcy preparation includes listing out payments made to friends or family for various reasons. If you’re paying family for baby sitting, or your phone, or reimbursing groceries, none of these transfers is a problem. But, paying back a loan to a friend or family member can create a case filing delay due to something called “preference”.
The most commonly covered “look back” at property transfers is the ninety (90) day and 1 year look back periods called a “preference” periods. This is an important look back period.
The trustee uses the “preference” look back to make sure that your creditors are treated equally. Paying one creditor more than the other is called “preference”. The trustee has the power to avoid a transfer that you made within a ninety (90) day period before you filed your bankruptcy petition if he or she determines that it is a preference.
This preference time period is one (1) year if the person you transferred value to was an “insider”. When a transfer is “avoided”, the trustee takes back the money or asset from your friend or family. Sometimes they may only threaten to take money back. But even the threat of trustee action causes stress for many bankruptcy filers, so we will generally delay your file date if we discover a preference.
The actual or constructive fraud look back concerns your activity while you were, or were in the process of becoming, insolvent. The trustee can avoid transfers if circumstances look like the intent was to hide assets. The trustee uses recovered money to pay your creditors.
Trustees may also take back transfers of property made for less than fair market value or made while you were unable to pay other debts. These include amounts paid to an “insider” under an employment contract.
The trustee may avoid any transfer of interest made within ten (10) years before the date you filed your bankruptcy petition. This avoidance is only if the court determines that the transfer was made with the actual intent to hinder, delay, or defraud a creditor. The look back period also gives the trustee the power to avoid any transfer made to a self-settled trust.
There are serious consequences for a finding of fraud by the bankruptcy Court. Your trustee can still sell assets, and the Court can deny Discharge. This is the scariest part of bankruptcy! But, if you are honest with the Court, you have nothing to worry about!