Realizing that you’re so far in debt that you can’t recover is a difficult situation. Some people will try to find ways that they can pay at least a portion of the debt off; however, others might know that they need to do something a bit more serious.
One option that you have is to file for bankruptcy. This is a legal avenue that allows you to have your debts discharged. There are two types of bankruptcy that consumers file. These are Chapter 7 and Chapter 13 bankruptcy. If you’re considering filing for bankruptcy, you may want to hire a Chapter 7 bankruptcy attorney or Chapter 13 bankruptcy attorney to help.
What are the Differences Between Chapter 7 and Chapter 13?
A Chapter 13 bankruptcy is known as a working man’s bankruptcy because you have to have an income that enables you to make regular payments to the bankruptcy court. These payments last three years for most individuals; however, some might have to pay for five years.
A Chapter 7 bankruptcy is known as a liquidation bankruptcy because the bankruptcy court liquidates your nonexempt assets to pay off your debts. Any debts that remain once those payments are made are discharged, which means you don’t owe them. Not everyone who needs to file for bankruptcy qualifies to file a Chapter 7.
How is Qualification for a Chapter 7 Bankruptcy Handled?
The means test takes the median income for a family of comparable size in the state into account. For example, the median income in California for a one-person household is $62,171 per year, as of November of 2020. When you’re trying to determine if you meet the requirements for a Chapter 7 bankruptcy, you have to figure out how you compare to the applicable median amount based on your last six months of income.
This means that if you made $30,000 total for the six months prior to your filing, you would pass the means test. You can determine this by multiplying $30,000 by 2 since there are two 6-month periods per year. That puts your annual income at $60,000 for the year.
What Should You Do if You Need to File Chapter 7 Bankruptcy?
Anyone who needs to seek a financial fresh start from the court should contact an attorney that specializes in bankruptcy. This can help you to learn more about the means test. It can also ensure that you get answers to any questions you have about the process or how it might affect you. The attorney can also help you to be sure that your rights are respected throughout the process.
Your bankruptcy firm should be conversant with Chapter 7 bankruptcy New York law. It entails giving a fresh opportunity to the bankrupt company. Being referred to as a fresh start bankruptcy, it would discharge and forgive most, but not all, unsecured debts. The tax-free unsecured debts would include loans, medical bills, utility bills, and credit card debt.