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Should you file Chapter 7 in 2017?

It's a new year, and for some, it's a good time to file for bankruptcy to get out from under unmanageable debts. The type of slate-clearing bankruptcy many debtors seek is Chapter 7.

Individual debtors may qualify for filing under Chapter 7, but a means test is involved. The means test determines whether debtors are truly insolvent. Bankruptcy can't be filed in any case if a debtor had a prior petition dismissed because they didn't show up for court or violated the court's orders in the six months prior to this filing.

Debtors will also be barred from filing if they dismissed their petition once their creditors attempted to reclaim property under liens.

Credit counseling by an agency that is on an approved list is also a prerequisite to file a Chapter 7 bankruptcy petition, but exceptions can be made in emergencies. Another possible exception may be if the administrator or trustee finds there aren't enough approved agencies to counsel debtors.

It costs $245 to file your bankruptcy petition. You will also need to pay an administrative fee of $75 and a trustee surcharge of $15. These fees are paid upon filing to the clerk of the court. Sometimes, however, the court will grant permission for debtors to make installment payments.

If you don't pay your fees, your case will likely be dismissed. These fees are in addition to any attorney's fees that may be charged to draft and file the petition and represent you throughout the pendency of the proceedings.

If you are tired of being hassled by creditors and are ready to deal with your debts head-on, filing for Chapter 7 bankruptcy can give you the fresh start that you need to begin anew.

Source: United States Courts, "Chapter 7 - Bankruptcy Basics," accessed Jan. 13, 2017

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