Different Rules Involved In Chapter 7 Bankruptcy Explained

Chapter 7 bankruptcy is designed to help individuals get relief from some of their debts. This type of bankruptcy involves the liquidation of some of the debtor’s assets, with the proceeds being distributed to creditors. However, not all assets are subject to liquidation, as Chapter 7 only affects non-exempt assets and property. 

If you reside in Austin, TX, and wish to file for bankruptcy to discharge some of your debts, it’s crucial to be familiar with the rules. Here are the primary categories of Chapter 7 bankruptcy rules you should know.

Qualification Rules

To qualify for Chapter 7 bankruptcy, an individual must meet certain income rules. The primary qualification rule is based on income, which must fall within the required range as per the median income guidelines. Each state has its own income guidelines, and if your income exceeds it, you may still be able to file for Chapter 7 bankruptcy if you pass a means test and are found eligible.

Means Test Rules

Before You Think About Hiring A Bankruptcy Lawyer To Start Your Chapter 7 Case, Make Sure You Know The Legal Rules That Apply To ItThe purpose of this test is to ensure that those who have the ability to repay their creditors are not able to discharge their debt. The Means Test evaluates a debtor’s income and debt from the preceding months. If there is a substantial amount of disposable income that could be used to pay creditors, the debtor will likely fail the means test. 

Individuals who do not meet the means test requirements may be able to file for another type of bankruptcy, such as Chapter 13, which typically involves a payment plan rather than debt discharge.

Eligibility Rules

There are certain eligibility rules that determine who can and cannot file for Chapter 7 bankruptcy. If you have previously filed for bankruptcy and had your debt discharged within the past 8 years, you are not eligible to file again for Chapter 7. 

Additionally, if your income and expenses permit you to file for Chapter 13 bankruptcy, you are not eligible for Chapter 7. Those who have attempted to defraud their creditors or the bankruptcy court also lose their eligibility for Chapter 7. Individuals must also agree to undergo credit counseling to be eligible for Chapter 7 bankruptcy.

Filing Rules

Filing for Chapter 7 bankruptcy requires following specific rules. First, you must undergo credit counseling from an approved agency before filing and paying the required fees. 

When filing, you must provide detailed information about your income, expenses, debt, and creditor holdings. You also need to disclose any recent property sales and exempt property, which varies by state.

After filing, you are protected by rules that prevent creditors from harassing you or attempting to collect a debt. An automatic stay order is issued by the bankruptcy court, protecting you during the process. This order generally stops liens, wage garnishment, and the seizure of personal property like your car, house, or bank account. The protection ends if the bankruptcy court dismisses your case.

Trustee Rules

Bankruptcy courts appoint trustees to oversee bankruptcy cases. Trustees ensure that debtors file all required documents, determine if a non-exempt property can be used to pay creditors, and decide which non-exempt property the debtor can keep.

Creditor Meeting Rules

Under Chapter 7 bankruptcy procedures, trustees are required to conduct meetings with creditors. The purpose of these meetings is to review important paperwork and other relevant documents. Debtors must attend these meetings, as failure to do so may result in the dismissal of their bankruptcy cases. In addition, debtors must provide trustees with necessary documents prior to the meeting, including copies of recent income tax returns at least a week before the meeting.

Why Hire A Bankruptcy Lawyer From Lincoln-Goldfinch Law

Read About The Rules Of Chapter 7 Bankruptcy In TexasSince bankruptcy rules can differ from state to state, the importance of seeking legal assistance from a bankruptcy attorney from Lincoln-Goldfinch Law can’t be overemphasized. You shouldn’t decide on bankruptcy before talking to a professional. 

There are many options to consider, including talking with creditors. You should talk to an experienced bankruptcy attorney in Austin, TX, to ensure you make appropriate decisions and save time and resources. Lincoln-Goldfinch Law is your place to go.


The rules and requirements for filing for Chapter 7 bankruptcy in Austin, TX, include qualification based on income, eligibility criteria, means test rules, filing rules, trustee rules, and creditor meeting rules. Debtors must disclose all information about their income, expenses, debts, and creditor holdings, and undergo credit counseling. The bankruptcy court appoints trustees to oversee the process, and creditors are required to attend meetings to review important documents. 

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