I’m speaking mainly to those who know that they need to file a Chapter 7 bankruptcy case. If you wait until you are back to work for several months and everything is going well again (except for what is now the older debt), you run the risk of becoming ineligible to file a Chapter 7 case. Eligibility is not based on how much debt you have – it’s based on your household income for the past six months and whether or not you have any “disposable” income that could go toward paying some or all of your unsecured debt. The court looks at the past 6 months of your income, compares it to certain qualified expenses, and determines what is left over (your disposable income) that could go toward paying your other debt. This process is called the Means Test.
For example, today I met with a newly married couple and they both were out of work for several months. When things were bad, they did some research online about bankruptcy, talked to some friends, and pretty much knew that a Chapter 7 would be their best bet to pull out of this bad situation. Their credit card bills, medical bills, and various other unsecured debts were all past due, but they had managed to keep their house and car payments current. In this instance a Chapter 7 would be their best option. They did well in their research and friends had pointed them in the right direction, to my office. They both got hired at really good paying jobs. However…..they waited and put off contacting me. They didn’t have any idea how important the timing of the Chapter 7 bankruptcy filing would be. The hardest job I have is convincing people to come and see me early, sooner rather than later. Many times we just talk and make plans to file later on. But at least they would have the information and knowledge about what they need to do and when to do it.