Bankruptcy is a word that sounds ominous itself and is a scary proposition for some people. Many debtors never enjoy the benefits of bankruptcy, or you can say they are just unaware of its perks. Bankruptcy indeed leaves an adverse effect on a person’s credit report for years, but yet it’s the best option for some people. Every person’s circumstance is unique to themselves. So it’s challenging to decide when to file for bankruptcy. Here are some questions you can ask yourself to decide you are eligible to file for bankruptcy.
- Do your monthly expenses exceed your income? If yes, then you are a perfect candidate for bankruptcy.
- Are you still unable to pay your debts after selling some possessions like your favorite car or dream home, and yet it’s hard to manage?
- Will bankruptcy be able to resolve all your debts? There will still be some debts that can’t be discharged like most student loans, so if your debt is a student loan, then bankruptcy may not give you financial relief.
If you find yourself in one of these positions, then you may want to file for bankruptcy.
Bankruptcy – Chapter 7
This is considered straight bankruptcy. Your qualifying assets may be sold to pay your creditors like banks or credit card companies. You are allowed to keep some assets, either because they are exempt or because they won’t be worth selling. Some exempt assets include clothes, a limited amount of cash for living, household products, tools for your job, and a vehicle.
Not everyone qualifies for chapter 7 bankruptcy. You will have to pass a means test to show you are at or below the average income in your area. Your Chapter 7 case will be over in as little as three to six months, eliminating your unsecured debt.
Bankruptcy- Chapter 13
If you can’t file a Chapter 7 bankruptcy, or if you have some money to pay creditors and there are assets that you want to keep, a Chapter 13 bankruptcy may be an option for you. This will allow you to pay your creditors over a fixed period if you have a reliable source of income. After a three- to five-year repayment, all of your remaining qualifying debt will be eliminated.
Speaking to a McAllen bankruptcy attorney to get you more answers if filing bankruptcy is right for you.