Chapter 7 Bankruptcy

Paul L. Brisson Bankruptcy Attorney at Law (909) 553-2182

Chapter 7 of the Bankruptcy Code providing for “liquidation,” that is, the sale of a debtor’s nonexempt property and the distribution of the proceeds to creditors. In order to be eligible for Chapter 7, the debtor must satisfy a “means test.” The court will evaluate the debtor’s income and expenses to determine if the debtor may proceed under Chapter 7.

New Bankruptcy Law Affects State’s Taxes
In April 2005, President George W. Bush signed into law the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. Most provisions of the law, Senate Bill 256, go into effect Oct. 17, 2005. More than twenty tax provisions of the new law affect individual and business bankruptcies.

Individual debtors filing for bankruptcy relief were required to complete either Official Bankruptcy Form B22A or B22C (Statement of Current Monthly Income and calculations). Bankruptcy Form B22A is the form most chapter 7 debtors will complete for “means testing” purposes; Form B22C is the form most chapter 13 debtors will complete. A debtor must enter income and expense information onto the appropriate form (i.e., Form B22A or Form B22C) and then make calculations using the information entered. Some of the information needed to complete these forms, such as a debtor’s current monthly income, comes from the debtor’s own personal records.

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