What do you need to know?
First things first: let’s define bankruptcy.
Bankruptcy is a legal process that allows individuals or businesses to get relief from some or all of their debts. There are several different types of bankruptcy, but the two most common are Chapter 7 and Chapter 13.
Chapter 7 bankruptcy is a liquidation bankruptcy. If you file for Chapter 7 bankruptcy, a trustee will be appointed to sell your non-exempt assets and use the proceeds to pay off your creditors. Once your debts have been paid off, the court discharges the remainder of your debts.
Chapter 13 bankruptcy is a reorganization bankruptcy. If you file for Chapter 13 bankruptcy, you’ll be required to create a repayment plan to pay off your debts within a period of three to five years. Once you’ve made all of the required payments, the court discharges any remaining debt.
There are two main ways to qualify for Chapter 7 bankruptcy: passing the means test or earning below your state’s median income.
The means test determines if your income is low enough to qualify for Chapter 7 bankruptcy.
First, you compare your current monthly income to the median income in your state. If it’s below the median, you automatically qualify; if it’s above the median, things get a bit more complicated.
From there, you’ll deduct certain “allowable expenses.” This includes things like food, shelter, transportation, etc. If your disposable income (what’s left after allowable expenses) is below a certain amount, you’ll qualify for Chapter 7 bankruptcy. If not, you’ll need to consider other options like Chapter 13 bankruptcy or finding another way to deal with your debts.
If you don’t qualify for Chapter 7 bankruptcy—or if you choose not to file for it—you may still be able to file for Chapter 13 bankruptcy instead. To do so, however, you must meet the following criteria:
There are several different ways to qualify for bankruptcy. Which applies to you depends on a variety of factors like your income level and type(s) of debt. The best way to find out if you qualify is by speaking with an experienced bankruptcy attorney who can help guide you through the process and answer any questions you may have along the way.
Bankruptcy can be a complex and confusing topic, but it doesn’t have to be. By understanding the basics of how it works and what qualifying criteria apply to each type of bankruptcy, you can make an informed decision about whether or not filing for bankruptcy is right for you.
To learn more or to schedule a consultation, contact R. Flay Cabiness, II, P.C. at (912) 417-5041 (Brunswick, GA); (912) 809-2141 (Hazlehurst, GA) or; (912) 324-3176 (Jesup, GA) to schedule a consultation.
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