After deciding that bankruptcy is right for your financial situation, there are a few important considerations that need to be made. Without taking the time to carefully research the process, you could possibly lose out on the debt relief you are seeking. If you are thinking of filing for bankruptcy, here are two things to consider.
Are You Eligible?
Just having debt is not good enough to file for bankruptcy. Depending on the type of filing you plan to make, there are eligibility requirements that must be met. If your fail to do so, you might be forced to delay your filing or choose another type.
Part of filing for a Chapter 13 bankruptcy is creating and following a repayment plan. To be eligible for this filing, you must prove you have enough disposable income to follow the plan. There are also debt limits to honor. As of February 2016, your unsecured debts have to be $383,175 or less and your secured debts have to be $1,149,525 or less to be eligible for a Chapter 13 bankruptcy filing.
Secured debts are those you acquired with collateral. For instance, your mortgage loan would be considered secured because your home is the collateral. Unsecured debts do not have collateral attached. A payday loan would be an unsecured debt.
To qualify for a Chapter 7 filing, you have to prove that your income is less than your state's median income for a household your size. The median varies by state, so check with the local court to determine what it is for your state. If your income meets the requirement, you are eligible.
What Is the Difference Between Filings and Which Should You Choose?
Chapter 7 and 13 filings have differences that you need to know before deciding which is right for you.
A Chapter 7 filing basically discharges most or all of your debts. The discharge means that you will no longer be responsible for paying any of them. It also means that your creditors cannot attempt to make you pay them.
A Chapter 13 filing differs in that you will have to pay back all or most of your secured debts. You have to submit a proposal to the court with your filing that details how you plan to pay back the debts. Once you complete the payments, the court will discharge the unsecured debts.
If your income is above your state's median income for a household of your size, it is likely that you will have to file for a Chapter 13. If it is below, you can file Chapter 7. Your attorney can help you determine which is best for your financial situation.
Consult with an attorney, such as Curtis A. Anderson, Attorney At Law, about any further concerns you have about filing for bankruptcy.