Bankruptcy filing offers individuals relief from debt and a much-needed chance to start their financial slate anew. Filing for bankruptcy may be the best step to take depending on certain circumstances and several other factors. If you’re seriously considering filing bankruptcy, here are some things to think about:
Is Bankruptcy Right for You?
When you’re deep in debt, the idea of wiping out all of your financial woes seems to be the perfect solution. However, not all kinds of debt are discharged when you file for bankruptcy, whether you file for Chapter 7 or Chapter 13 bankruptcy. For instance, Chapter 13 will discharge most of your debts such as credit card debt and medical bills. However, priority debts like child support and recent tax obligations need to be paid in full. Therefore, to know if bankruptcy filing can really help you, it is important to look at what exactly you want to accomplish by doing so and whether your specific financial obligations will be discharged in bankruptcy.
Are You Eligible?
Not everybody who has debts is eligible to file for bankruptcy. To be eligible for Chapter 7 bankruptcy, you must pass the means test, which looks at the level of your income and expenses. In the case of Chapter 13 eligibility, one of the requirements is having enough disposable income that will allow you to repay the priority debts that you’re required to pay. In addition, both your secured and non-secured debts should not exceed a particular amount in order for you to qualify for Chapter 13.
Are You Looking to Stop a Foreclosure or Lawsuit?
A provision in bankruptcy law called automatic stay stops creditors from collecting debts from a person who has filed for bankruptcy. If your creditors have taken legal action such as a lawsuit so they can collect money from you, bankruptcy filing may help you stop them their collection efforts and eliminate your debt. If you’re facing home foreclosure or car repossession due to payment defaults, you may be able to delay losing your property when you file for bankruptcy. Chapter 13 bankruptcy may also allow you to catch up on your obligations and reduce your loan balance. Automatic stay takes effect once you file your bankruptcy petition.
How Will Bankruptcy Filing Affect Your Property?
In Chapter 7 bankruptcy, you may be able to keep some of your assets but those that are not covered by bankruptcy exemptions can be sold by a bankruptcy trustee in order to resolve your debts. On the other hand, you can keep all of your assets in Chapter 13 bankruptcy but you are required to pay back your unsecured debt at least in the amount equivalent to the value of your nonexempt properties, which would not be an ideal situation if your nonexempt assets were significant.
Before filing for bankruptcy, make sure to consider all other options. Speak with your creditors. Perhaps some of them will be willing to work something out with you. You may not have to file for bankruptcy at all if you can find other ways to settle your debts. Otherwise, learn as much as you can before proceeding with bankruptcy filing to ensure you will truly benefit from it. The LegalZoom education center is a good resource about the ins and outs of bankruptcy law.