Every Debtor needs to provide documentation of their financial situation.

(A)-Tax returns for the 4 years immediately preceding (before) the year you file a Bankruptcy case. For example, if you file in 2020, you must provide copies of your Federal (U.S.) income tax returns for 2016, 2017, 2018, and 2019. If you have not filed your returns, you need to file them, preferably before you file a bankruptcy case. If you do not file your returns, your Bankruptcy case will be dismissed (thrown out by the court).

(B) Pay stubs or proof of income for the six-month time period immediately preceding the month you file your case. For example, if you file your case on January 15th, you need to provide copies of your pay stubs or printouts from your payroll department from July, through December of the previous year. I request that my clients provide pay stubs for the month before that so that I can calculate your average pay based on the year-to-date figures on your check stub.

Why do I need to provide all of this information, and where does it go?

(A) the Bankruptcy Reform Act of 2005 requires all Debtors to submit these documents to the Bankruptcy court appointed Trustee. The Trustee then reviews these documents to be sure they match the figures you list in your Bankruptcy papers (called Petition).

(B) The second reason is so the Trustee can review the “Means test” to be sure you qualify for the type of Bankruptcy that you filed. The “Means Test”, also created by the Bankruptcy Reform Act of 2005, requires every person who files for Bankruptcy to provide proof of their average income for the 6-month time period before the case is filed with the court. Then the attorney calculates that average. The average is then compared to the median (average) income for your size household for your state. If you are below that figure, you qualify for Chapter 7 (Debt-elimination) Bankruptcy. If you are above that figure, then your attorney completes the Means Test form further, to see if you qualify. Certain deductions are allowed in this test, based on a series of complicated rules and calculations.

The Means test results show a number. If the number is positive, generally, that number, multiplied by 60 is the amount that you have to pay on your “unsecured debt” in a Chapter 13 (payment plan) Bankruptcy. If that number is very small, or negative, you still qualify for the Chapter 7 (debt elimination) Bankruptcy. If you do not qualify for Chapter 7, you would then need to file a Chapter 13 Bankruptcy to pay at least some part of your debts, based on the Means Test results.

Credit counseling requirements: two courses- one before filing and one after filing.

Before Filing- Credit Briefing

Before a person can file for Bankruptcy relief, he or she must complete a course from an approved credit counselor. (The U.S. Trustee’s office, which oversees the Bankruptcy system, approves the counselors). Your attorney will give you a list of the approved agencies. This course lasts approximately 1 hour and can be done on the internet with a follow-up phone call, totally by phone, or in-person. You give the counselors information about your finances. Then the counselors are required to explain all of your possible options to try to solve your financial problems. They cannot give you legal advice on which solution would best help you. That is the role of your Bankruptcy Attorney. This course is called the Pre-filing Credit Counseling Course. You cannot file a Bankruptcy case until you complete this first course and get a certificate. Our clients usually reimburse our office for the cost of the course, that we pay for their convenience. The course costs between $36-50.00, for single or married people filing together.

The Second Counseling Course- Financial Management or Debtor Education Course

This is a course about how to manage a household budget, and how to handle your money. It is designed to help you make better financial decisions in the future, so that you (hopefully) don’t end up with money problems in the future. You will need to participate in a 2-hour video or live presentation, in person, online, or by phone conference with a home-study book. You need to complete the course before your case is over, in order to get a Discharge Order from the Court (completion of your case). I recommend that my clients complete the course before the required court hearing in their case (called “meeting of creditors”) to prevent problems getting the course done in time. Some of the Chapter 13 Trustees offer this course for free, at the same place as the court hearing, on the same day. Otherwise the course costs between $19 and $50.00 per person.