Qualifications for Bankruptcy

1
Qualifications for Bankruptcy
2
Two Types of Bankruptcy

• When people hear the word bankruptcy, they
  dont often understand its full meaning, thinking
  it either means not having to pay back debt or
  having your credit ruined for life.
• A bankruptcy lawyer will explain to you that
  options are nuanced and you can choose between a
  Chapter 7 and Chapter 13 bankruptcy.

3
Chapter 7 Bankruptcy

• A Chapter 7 bankruptcy is designed to release
  individuals from overwhelming debt. Anyone can
  file for Chapter 7 bankruptcy, and there is no
  limit on the amount to be released from.
• The Chapter 7 does, however, affect your credit
  rating severely. It is a trade-off between
  complete absolution and credit risk.

4
The Debt Relief Barrier

• Crippling debt can be something that keeps an
  individual or family from ever being able to
  succeed again. This is why the government
  recognizes the need for such powerful tools as
  the Chapter 7 bankruptcy provision.
• To cut down on the abuse of the provision,
  Congress put into place a handful of criteria
  that anyone considering bankruptcy need to
  consider.

5
The Means Test

• The means test is a way for the courts to
  determine whether you are eligible for a Chapter
  7 or not. The process looks at the amount of
  income you have, what assets are owned, and the
  amount of monthly expenses you are accruing.
• The leftover is then compared with the State
  median. If it is below the median, than you are
  eligible.

6
Credit Counseling

• Because people often panic when faced with
  economic disaster, credit counseling is a
  requirement to be eligible for a Chapter 7.
• This is a good thing as it can help a person see
  options they may not have been aware of. Many
  times a repayment plan with less long term
  repercussions is able to be found.

7
Debtor Education

• The last requirement to file a Chapter 7
  bankruptcy is debtor education class.
• Classes are not overly long or strenuous, but
  are rather there to help you understand what you
  are getting into and how to avoid the same
  pitfalls in the future.

8
Disabled Veterans

• Its important to know that in some cases the
  government grants special leniency for disabled
  veterans.
• If you are able to show that you debt was accrued
  while actively serving the country, than it is
  highly likely that you will be able to file a
  Chapter 7

9
Chapter 13 Bankruptcy

• Unlike the previous option, a Chapter 13
  bankruptcy is for high-income individuals who do
  not pass the means test.
• Those applying must still prove financial trial,
  but the amount of the debt that can be forgiven
  is limited. As well, the credit penalties need
  not be as severe as a Chapter 7.

10
Climbing Out of Debt

• The purpose of the Chapter 13 is to allow you to
  release some debts while still paying off others.
  This is a more preferable option as you can still
  leave some of your credit options intact.
• A modification lawyer can work with you to help
  you work out reasonable and doable payment plans.