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Chapter 7 Bankruptcy: A Brief Overview of Eligibility and Asset Liquidation
There is a multitude of relief options for Americans who are struggling with debt, and in some situations, filing for bankruptcy is a smart decision. Many debtors find that either chapter 13 or chapter 7 bankruptcy can put them on the path toward financial stability. Before filing for chapter 7 bankruptcy, though, it is important to understand if you are eligible and what may happen to your assets.
The best source of information about your unique bankruptcy case is an experienced attorney. A bankruptcy lawyer can evaluate your debts to determine which bankruptcy chapter - if any - is ideal for your particular situation. In the meantime, here is some important information about state median incomes and asset liquidation as they relate to filing for bankruptcy:
State Medians and Your Income
According to UScourts.gov, one of the factors that determine if a person qualifies for chapter 7 bankruptcy is his or her income. If your income is too high, a judge may request that you file for chapter 13 instead, because you will have the means to work with a structured payment plan. Of course, whether or not your income is high or low is relative to the state median.
Bankruptcy Filing Questions
Making the decision to file for chapter 7 bankruptcy is not easy. The thought of selling a home and other assets to pay debt is stressful to say the least. However, chapter 7 bankruptcy is often a smart option for those who want to achieve financial independence and stop creditor actions.
Before filing any chapter of bankruptcy, it is important to learn about the process and qualification guidelines. There are certain questions you must ask, and an attorney can guide you through the proceedings, address your concerns, and ensure you do not make mistakes that compromise your interests.
If you are considering bankruptcy, be sure to ask your bankruptcy lawyer these two questions:
How Will My Income Affect My Bankruptcy Options?
An applicant’s income is one factor that determines whether chapter 7 or 13 bankruptcy is the best course. If your income is greater than the state median, according to UScourts.gov, a request for chapter 7 may automatically convert to chapter 13 because the applicant will have the means to work with a structured payment plan.
FAQs about Chapter 7 Bankruptcy
Although much of the United States seems to have recovered from the Global Financial Crisis, thousands of Americans still declare bankruptcy every year. Although many are familiar with the general implications of bankruptcy, few first-time filers understand the intricate laws and how they relate to their particular case.
To shed some light on this complex legal field, here are four common chapter 7 bankruptcy FAQs:
What Makes Chapter 7 Unique?
Unlike chapter 13 bankruptcy, which restructures debt into a manageable payment plan, chapter 7 involves the liquidation of assets to pay off creditors. Depending on the types and amount of debt, chapter 7 bankruptcy may allow the filer to pay off his or her debts completely.
Is Chapter 7 Right for Me?
Before deciding to file for chapter 7 bankruptcy, you should find out if you qualify in the first place. Chapter 7 is available to any legal entity, individual or otherwise, according to Uscourts.gov.
Credit Card Debt: Can I Keep My Credit Cards When Filing for Bankruptcy?
Most debtors face similar personal and emotional conflicts. The uncertainty that comes with insurmountable debt can cause immense stress, and many Americans feel overwhelmed with the complexities of financial recovery. Although many debtors share these concerns, each case is unique.
There are many causes of debt—from medical bills to a sudden loss of employment. One of the most common sources is credit card debt. With high interest rates and the convenience of credit, these cards land many Americans in financial turmoil. This article will shed some light on credit card debt and address some of the associated concerns.
Three Factors Determine If Your Credit Card Accounts Will Close Due to Bankruptcy
All bankruptcy filers must provide a complete record of their debts. This includes credit card debt.
Factors Which May Impact Chapter 13 Bankruptcy Eligibility
Filing for chapter 13 bankruptcy is a smart option for thousands of Americans who struggle to pay their debts. Choosing to file bankruptcy is a major decision, and you should only do so after evaluating alternative options. You should also be aware of the bankruptcy qualifications that apply when attempting to file for chapter 13:
Personal Income
According to Uscourts.gov, personal income is the first criteria when filing for chapter 13 bankruptcy. Proof of a stable income is essential.
Remember that chapter 13 differs from other forms of bankruptcy in that it is not an outright dismissal or liquidation of debts. Instead, this chapter offers the option to restructure and pay off debts over time. This is only possible when the filer has a stable income. The length of the payment plan depends on how the filer’s income compares to the state median.
Are There Alternatives to Bankruptcy?
If you are considering bankruptcy, then you probably have several questions and concerns related to the bankruptcy process. There is no doubt about it: Filing for bankruptcy is a serious decision that can affect your personal and financial opportunities.
Here are the answers to three common questions about bankruptcy:
What Are the Alternatives to Filing for Bankruptcy?
In many cases, filing for bankruptcy is a smart decision that puts debtors on the path toward a debt-free life. However, it may not be the only option. Sometimes, aggressive budgeting and smart financial planning are enough to pay off debts.
Each case is unique, and there is no one-size-fits-all solution to repaying debt. Before you decide to file for bankruptcy, you should discuss the options with an attorney. Credit counseling services may also be helpful.
Bankruptcy Qualifications: Can You File for Bankruptcy Twice?
Provided that you qualify for bankruptcy, it is likely that you will only apply once in your life. If everything pans out well, the process should set you on a more financially healthy course. However, whether due to a serious injury, loss of income, or another financial hardship, some people may find themselves considering bankruptcy a second time.
Is There a Limit to the Number of Times You Can File for Bankruptcy?
For the most part, you may file for bankruptcy as many times as you wish — although this does not imply that you should. Applying for bankruptcy too soon after the first may void your ability to discharge your debts, according to the Federal Trade Commission. This is critical because, in many cases, the purpose of bankruptcy is to discharge debt to make your finances more manageable.
Tips for Dealing with Debt Collectors
As anyone with experience can relate, debt collectors can make life stressful. The sound of a ringing phone is enough to cause anxiety, and although some collectors may be easier to work with, their persistent efforts can feel overwhelming.
Many debtors are surprised to find out that there may be several options available to help them climb out of debt. Some of these can stop the actions of collections agencies almost immediately. In the meantime, here are three tips for dealing with collector calls:
Answer the Phone
According to Creditcards.com, one of the most important steps when dealing with debt collectors is to be responsible and answer the phone. It is equally important to respond to any written notices. Even if the debt seems like it is not yours, do not let it stagnate. Ignoring calls and attempts to contact you can hurt your ability to work out a payment arrangement.
Can Bankruptcy Stop Wage Garnishments?
A wage garnishment is a court order that requires a debtor’s employer to pay a portion of the debtor’s wages to one or more creditors. Many people consider filing for bankruptcy in order to stop or prevent wage garnishment.
According to federal bankruptcy law, only a chapter 7 bankruptcy can stop a wage garnishment. During chapter 7 bankruptcy, the filer liquidates his or her assets to pay off debts, and the court issues an automatic stay.
This immediately stops wage garnishments, as well as all other debt-collection proceedings such as foreclosures or evictions. Chapter 7 bankruptcy will only put a stop to commercial wage garnishments, such as those related to credit cards, certain loans, and mortgages, but it will not stop garnishments for child support or delinquent taxes.
How Bankruptcy Laws and Your Finances May Affect the Bankruptcy Process
In addition to the stress that bankruptcy can cause, there is a long list of steps that you must take before filing. However, you should keep in mind that bankruptcy can put you on the path toward a debt-free life, so completing the necessary procedures may be a smart decision.
According to the U.S. Government Printing Office, the Bankruptcy Abuse Prevention and Consumer Protection Act passed in 2005. It requires people in Texas to complete credit counseling six months prior to filing for bankruptcy. You must also complete a financial management course after filing.
Your income and expenses may determine the bankruptcy chapter that you need to file. This is why chapter 7 filers must complete a means test to determine if their income is low enough.
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