In today’s tough economy, it is not uncommon to face an insurmountable amount of debt. With home and car payments, in addition to debt from credit cards, student loans, and medical care, it is actually very easy for individuals to fall deep into a financial hole that they simply cannot dig out of. This is often how things like bankruptcy and foreclosure creep in. Bankruptcy is where consumers have the chance at a fresh financial start by wiping away most of their debts, but also suffering a blow to their future credit in the process.
Men and women can file for bankruptcy protection in a number of forms — the most common are Chapter 7 and Chapter 13. Knowing who can file for bankruptcy is key in determining whether this financial path is appropriate for you.
Let’s look at the two common types to explore who can file for bankruptcy and in what situations.
CHAPTER 7
Income Level
Because Chapter 7 bankruptcy wipes away most debt completely, a bankruptcy court will only allow those who honestly cannot pay their debts to reap its benefits. If you have a high income, you will not qualify for Chapter 7 bankruptcy.
A bankruptcy judge will look at your family’s income and compare it with the median income in your respective state. If your income is higher than the median, it’s unlikely you will be granted Chapter 7 bankruptcy protection.
Means Test
A means test also determines who can file for bankruptcy in Chapter 7 format. This determines whether or not you have disposable income or a way to scrounge up money to pay for your debt rather than have your debts discharged. If you have a lot of disposable income or big-ticket items you could sell, you might not qualify.
Have You Filed For Bankruptcy Recently?
If you had been granted a bankruptcy — Chapter 7 or Chapter 13 — in the last eight years, you will not qualify.
CHAPTER 13
If you did not qualify for Chapter 7 bankruptcy because of your income level or amount of disposable income, then you will still be able to receive Chapter 13 bankruptcy protection. This is for higher-income earners who are placed on a payment plan so they can pay off their debts rather than escape them completely. Consumers who file for this form of bankruptcy can still expect to take a financial hit, but in the long run, getting out of debt will present numerous financial advantages.
Seek Legal Help
Bankruptcy is not something you want to take on alone. Having quality legal counsel in your corner is imperative. TalkLocal can help you find a lawyer for these purposes. Simply type in a little bit about what you’re looking for, and we’ll have qualified lawyers calling you, ready to assist.
