Have you been thinking about filing for Chapter 7 bankruptcy but are not quite sure if this is the right debt relief option for you? If so, taking the time to answer the three questions below can help you to make this decision.
#1: Was Your Annual Income Last Year Less Than The Median Income For Your Area?
In order to file a Chapter 7 bankruptcy petition, you will first need to pass what is known as a means test. The purpose of this test is to ensure you meet the income requirements to qualify for Chapter 7 bankruptcy relief. In order to determine whether or not you meet these requirements, you will simply need to compare your income from the previous year to the average income in your area for that same time period. If your income is less than the median income in your area, you will be eligible to file a Chapter 7 bankruptcy petition.
#2: Is Your Debt Primarily Made Up Of Unsecured Debts?
Chapter 7 bankruptcy allows individuals to discharge some or all of their debt. However, the type of debt which can be discharged is limited. For example, secured debts such as a mortgage or a car loan cannot be discharged as part of these proceedings. Unsecured debts, such as credit card bills, on the other hand, can be discharged if you meet all of the criteria under bankruptcy laws. If the majority of your debt is unsecured debt, Chapter 7 bankruptcy could provide the debt relief you are looking for. However, if you have mostly secured debts, you will want to seek out another debt relief option.
#3: Do You Have Limited Assets Or Income That Could Be Used To Pay Creditors?
The law requires that you pay your debts if you have the financial means by which to do so. This does not always mean having an abundance of cash in the bank. If you have significant assets which can be sold in order to satisfy your debts, filing for Chapter 7 bankruptcy will not be in your best interest. Under Chapter 7 bankruptcy laws, only modest assets can be protected from seizure. If your assets exceed the value allowed by law, these assets will need to be sold and the profits used to satisfy as many of your debts as possible. Consequently, Chapter 7 bankruptcy relief is best suited to people who have limited assets or income with which to pay their creditors.
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