Last year was a tough time financially for many people, and 2010 looks no different. Many people have bills piling up and have no means to pay. Unemployment rates and foreclosures are at an all time high. Businesses are closing and people are in dire financial straits. However, how do you determine if it’s time to file for bankruptcy or not? How do you know when enough is enough? There are several factors that determine whether or not bankruptcy is right for a person. Here is a summary of the aspects necessary to qualify.
Chapter 7 Requirements
If you are someone who was recently unemployed and has no other means of income, then you may qualify for Chapter 7 Bankruptcy. The way it is determined is through a means test. It is a court-administered tool for comparing your income to other families of the same size and location. For example, if your income is lower than the average median income in your area and you have no other means of paying your bills and creditors, the courts may approve you under the Chapter 7 rules.
Once accepted, the courts will assign a person of trust who will compile a list of all your non-exempt assets. These non-exempt assets are sold to pay off creditors. The rest of your debt is dismissed by the courts. As a result, many people feel much more relieved once the process is complete. Because it leaves a clean slate to start over without the constant worry of past financial mistakes hanging over their heads.
Chapter 13 Requirements
If your application is denied because you exceeded the income requirements for a Chapter 7 filing, then Chapter 13 is right for you. Also, if you have debt not legally discharged by the courts and personal and/or business assets, then Chapter 13 would be the best plan to pursue. Because in Chapter 13, the courts will set a payment schedule to pay off your debts in an average of 3-5 years. Therefore, Chapter 13 is for someone who has a stable means of income and disposable assets.
Chapter 13 will prevent your home from going into foreclosure. Once Chapter 13 bankruptcy is filed, the foreclosure process stops. However, it is temporary. You must bring late payments up to date in a reasonable amount of time. If not, you will lose your house. Therefore, do not think that you are completely out of the woods. Continue to make your regular mortgage payments as explained by the courts and/or attorney. Paying back mortgage payments is part of the process.
Filing for bankruptcy is not a simple process. The emotional ties that people have with monetary possessions are exhausting. These emotions come up easily during these times and the best way to handle the procedure is with support. You need to let your family and friends know what is unfolding. Find a trusted attorney with experience in bankruptcy law. Do some research online to gather as much information about it before proceeding.