If you find yourself in a position where it’s difficult for you to keep up on payments and you’re drowning in debt, one of the things that you may have begun considering is the option for bankruptcy. Filing for bankruptcy is an excellent way that you can manage financial distress and have a chance to start over with your finances. If you’re in a position where your debt has become unmanageable, having access to the option for bankruptcy can make sure that you can wipe the slate of your finances clean and start new.
There are many things to consider when you’re making this decision such as some of the negative consequences that can occur as well as the various types of debt that bankruptcy can eliminate. There’s a fair amount of due diligence that needs to take place before you move forward with bankruptcy and it’s important not to take the idea of filing for bankruptcy as a lighthearted task. Here are some of the top key points you should consider before you file for bankruptcy.
Determining Your Eligibility
Under a Chapter 7 bankruptcy, you’ll be able to discharge most of your debt with exceptions to student loans and tax obligations in child support to name a few. Under a Chapter 7 bankruptcy, you may be forced to sell some of your property to handle some of your obligations on debts. To qualify for Chapter 7 bankruptcy you will need to pass a means test showing that you would not be able to pay off your debts with your current income.
A Chapter 13 bankruptcy will allow you to create a repayment plan where you can repay your debts over 3 to 5 years. Some of your debts may be renegotiated and the majority of your debts will not be discharged.
The Means Test
Under Chapter 7 bankruptcy, you must pass a means test to ensure that you will not be able to afford to repay your debts. The way to pass the means test is to demonstrate that your monthly income is less than the median monthly income for your state based on your family size. There are also complex calculations that can be completed to determine whether your disposable income subtracting your living expenses is enough to satisfy your obligations for the debt.
Chapter 13 bankruptcy obligations need to showcase that you have a disposable income that is high enough to afford your repayment plan. Your secured debt may not exceed $1.145 million in your unsecured debt can exceed over $385,000. To qualify for Chapter 13 bankruptcy, you’ll have to have filed both your state and federal income taxes over the last four years.
Considering Asset Protection
Depending on what you are bringing into your financial situation for debt relief, selling off some of your assets may help manage your primary debts. Many of your assets may be sold in order to discharge her debts under Chapter 7 bankruptcy but through a chapter 13 bankruptcy, it’s possible that you could protect various assets like your primary home, vehicle, and investments. The type of assets that you own and the value of those assets can be important. Working with a professional could be a wise idea in preventing the chance that you can prevent many of your assets from being sold to manage your debts.
If you are considering the option of filing for bankruptcy, it is important to consult with a bankruptcy attorney first. Working with our team can make sure that you’ll be prepared to file for bankruptcy and with the right information to secure your assets. Contact us today if you are considering bankruptcy.