- 1). Go to credit counseling. The new bankruptcy laws require that all debtors receive credit counseling from a government-approved agency within 180 days of filing the bankruptcy petition. The debtor should come away with a certificate of credit counseling that he should present to the court.
- 2). Take the means test. Compare your family income to the median family income in your state. Consult the Census Bureau website for your state median income. If your family income is less than the state median, skip to Step Four.
- 3). Calculate monthly disposable income by deducting allowed monthly expenses from monthly income. If your monthly disposable income is less than $100, you can file for Chapter 7. If your monthly disposable income is more than $100, and that amount would not pay at least 25 percent of your debts over the next 60 months, you can file for Chapter 7. If your monthly disposable income is more than $100, and that amount would pay 25 percent of your debts over the next 60 months, you cannot file for Chapter 7 bankruptcy. This figure proves that you can complete a Chapter 13 repayment plan, so either you file for Chapter 13 or not file bankruptcy at all.
- 4). File your Chapter 7 petition with a $299 filing fee, along with schedules listing assets and liabilities, current income and expenditures, executory contracts and unexpired leases, and a statement of financial affairs. A bankruptcy trustee will administer your case.
- 5). Claim exempt property. The trustee reviews the documents filed with your petition and figures out which property would be exempt from being sold. Each state has its own list of exempt property, which include a home, a motor vehicle, home furnishings and appliances, clothing, pensions, wages, and insurance, among other things. Consult your state laws for a list of exemptions. All other property remains property of the bankruptcy estate. The trustee sells property of the bankruptcy estate and uses the proceeds to pay your creditors. At the end of the process, your debts will be discharged, allowing you to have a fresh financial start.
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