Last year was a difficult time financially for many people, and 2010 seems to be 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 is time to file for bankruptcy or not? How do you know when enough is enough? There are several factors that determine whether bankruptcy is right for a person or not. Here is a summary of the aspects necessary to qualify.
Chapter 7 Requirements
If you are someone who was recently unemployed and have 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 to compare your income with that of other families of the same size and location. For example, if your income is lower than the median median income in your area and you have no other means to pay your bills and creditors, the courts can approve you under the Chapter 7 rules.
Once accepted, the courts will assign a trusted person who will compile a list of all your non-exempt assets. These non-exempt assets are sold to pay 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 looming 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 legally not discharged by the courts and personal and/or business assets, then Chapter 13 would be the best plan to follow. Because in Chapter 13, the courts will set a repayment 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 available assets.
Chapter 13 will keep your home from foreclosure. Once a Chapter 13 bankruptcy is filed, the foreclosure process stops. However, it is temporary. You must bring the 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 directed 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 belongings are exhausting. These emotions come up easily during these times and the best way to manage the procedure is with support. You need to let your family and friends know what is developing. Find a trusted attorney with experience in bankruptcy law. Do your research online to gather as much information about it before proceeding further.
