Chapter 7 of the U.S. Bankruptcy Code provides a mean to a fresh start for honest debtors who are in need of a fresh start.  A Chapter 7 can be filed once every eight years, if the person qualifies.  The qualifications have changed since the major bankruptcy reform law of October 17, 2005.  Among the many new requirements is a stringent means test.  A person who earns more than the state median averaged over the most recent six months must pass the means test.  The test is designed to determine whether or not the person has the ability to repay a portion of his debts of thirty-six months, or whether the person is entitled to a fresh start.  A calculation is made related to the person’s income and expenses.  The expenses are matches against the IRS standards. 

Additionally, a person must take a credit counseling briefing within 180 days of filing the bankruptcy case.  The credit counseling briefing is basically a data entry exercise for the debtor as well as a long reading assignment.  The credit card industry had hoped that many would-be debtors would decide to enter into a debt management plan in lieu of filing bankruptcy.  Statistically, this has not been the case.  Less than 2% of those who take the credit counseling decide to enter into a debt management plan.  It is unclear as to whether those individuals sincerely desired to file a bankruptcy or not.

Once a bankruptcy petition is filed, a notice is sent to all creditors advising of the filing.  Creditors then have an opportunity to examine the debtor at a 341 meeting of creditors.  Typically, few creditors appear and the debtor is granted a discharge under Chapter 7.  The time frame from filing to discharge is approximately 120 days.