Bankruptcy is a complex law. There are some requirements that you would have to meet in order to file for bankruptcy. According to the recent changes in the bankruptcy laws, “ticket in” and “means test” are two very important requirements that you must meet in order to file for bankruptcy. It is good to be aware of these requirements before you file for bankruptcy because that will smoothen the process for you.
Credit Counseling Session Requirement
According to bankruptcy law, before you file for bankruptcy, you have to complete a “ticket in” session. “Ticket in” refers to a credit counseling session. You are required to complete this credit counseling session six months prior to filing for bankruptcy. Furthermore, you must remember that this credit counseling session must be done by a non-profit agency that has been approved by the United States Trustees office.
This requirement was introduced by the recent changes in the bankruptcy law. This counseling can be held over the phone, in person or on the internet. An average counseling session is of 90 minutes duration. During a counseling session, the counselor would discuss various alternatives to bankruptcy with you. He/she would also give you tips on budget analysis. The counselor will also discuss the “means test,” which we will discuss later on.
Exemptions
There are exemptions to this requirement. If the United States Trustees or a bankruptcy administrator reports to the court that the approved credit counseling agencies in your district would not be able to handle all the filers, you will get an exemption from this requirement.
This requirement is also not applicable to a debtor who submits to the court a certification informing of some critical circumstances that justify a waiver of the credit counseling requirement.
A debtor is exempted from this requirement if he/she proves to the court that he/she did apply for a credit counseling session from an approved counseling agency but was unable to get the services during the 5-day period that began on the date on which the request was made.
If a debtor is unable to meet this requirement due to incapacity, disability, or active military duty, the court can exempt him/her from this requirement, but that happens after a hearing.
Another important fact that you must understand about credit counseling session is that that the agency must provide the counseling services even if you are unable to pay for them. Furthermore, the credit counseling agency cannot withhold the certificate of counseling because you were unable to pay for the services.
Means Test Requirement
In order to file for Chapter 7, you need to pass a “means test”. This test is divided into two parts. The first part exempts certain expenses such as rent, food, utility bills, etc. to determine if you can pay 25 percent of your unsecured debt. In the second part, your income will be compared to your state’s average income. The “means test” requirement was introduced to prevent people from abusing the bankruptcy law.
If your income is above the average income of your state and you are able to pay 25 percent of your unsecured debt, you will not be allowed to file under Chapter 7. However, you can go ahead and file under Chapter 13.
If your income falls below the average income of your state but you are able to pay 25 percent of your unsecured debt, you may be allowed to file under Chapter 7. However, this depends on the court. If the court believes that you would not abuse the system by filing under Chapter 7, it would allow you to do so.
The court allows for special accommodations for cases involving active-duty military service members, low-income veterans of the military, and those with serious medical conditions.
Understanding credit counseling service and the means test requirements will help you in your case. For example, if you already know that you would fail the “means test”, you would not waste your time filing under Chapter 7. You could instead go for Chapter 13 and try to resolve your financial situation.