How to Determine Whether You Are a Good Candidate for Bankruptcy 

 Posted on November 10, 2022 in Bankruptcy

If you are struggling with debts, it can seem like you need to dig yourself out of a hole, and the prospect of facing multiple years of financial difficulties can cause a great deal of stress. Fortunately, options for debt relief are available, including bankruptcy. However, the decision to file for bankruptcy may not be easy, and the bankruptcy process can add additional stress and complications to an already difficult situation. As you consider your options, you will want to look at some key factors that may indicate whether you are a good candidate for bankruptcy.

Signs That You Need Debt Relief

The first thing to remember about bankruptcy is that it is not meant to be a moral judgment against a person. While people are often embarrassed about debt and financial struggles, most bankruptcy cases involve situations where families encountered difficulties through no fault of their own. A layoff or other issues that affect a person's income can put a family in a precarious financial position, and large, unexpected expenses can also cause difficulty, such as when a serious injury or illness requires costly medical treatment. Bankruptcy is an option for debtors regardless of the reasons they have accrued debts, and seeking debt relief should not be seen as an opportunity rather than a failure.

You may want to consider bankruptcy if you are experiencing any of the following issues:

• You are only able to make the minimum payments on credit cards each month, and you have had to cut back on other expenses in order to do so.

• You are regularly receiving calls from creditors or debt collectors, and you need to put a stop to this harassment.

• You are forced to use credit cards to pay for necessary expenses such as groceries or utility bills.

• Because of your debts, you are unable to maintain enough savings to meet your needs in emergency situations.

• Your debts are so large that you are uncertain about the full extent of what you owe.

By filing for bankruptcy, you can eliminate the stress related to these issues and receive the fresh financial start you need.

Understanding Your Eligibility for Bankruptcy

There are two types of bankruptcy that consumers can file: Chapter 7 and Chapter 13. Chapter 7, also known as liquidation bankruptcy, discharges most of your debts. In order to qualify, you must pass a means test that considers your income and expenses. Chapter 13, also known as reorganization bankruptcy, allows you to keep your property and repay your debt over time. 

To determine if you are eligible for Chapter 7 bankruptcy, you need to calculate your "Current Monthly Income" (CMI). CMI is your average monthly income over the past six months from all sources, including employment, self-employment, pensions, Social Security, spousal support, child support, unemployment benefits, and disability benefits. If your CMI is less than the median income for your family size in your state, you automatically qualify for Chapter 7 bankruptcy. If your CMI is greater than the median income for your state, the means test will look at your disposable income - that is, the income you have left after paying for reasonable necessary expenses like food, shelter, transportation, taxes, etc. If you do not have enough disposable income to pay off a significant percentage of your debts over five years, you will be able to discharge your debts through Chapter 7.

If you do not qualify for Chapter 7 bankruptcy, you may still be eligible for Chapter 13 bankruptcy. This may also be your preferred option if you have non-exempt assets that you want to keep or if you are looking to avoid a foreclosure or repossession. To qualify for Chapter 13, you must have a regular source of income, and you will need to develop a repayment plan that shows how you will repay a portion of your debts over a period that will last either three or five years. After you complete this repayment plan, you will receive a discharge of your remaining unsecured debts.

Contact Our New Braunfels Bankruptcy Lawyer

If you are considering filing for bankruptcy, it is important to consult with an experienced lawyer who can help you determine if you are a good candidate for debt relief. At the Law Offices of Chance M. McGhee, our Kerrville bankruptcy attorney can help you understand your options, and we will make sure you complete all requirements during the bankruptcy process so that you can live debt-free. Call us today at 210-342-3400 to set up a free consultation and get started with the bankruptcy process.

Sources:

https://www.nerdwallet.com/article/finance/bankruptcy-best-option

https://www.lendingtree.com/bankruptcy/

https://www.thedollarstretcher.com/money-problems/am-i-good-candidate-for-bankruptcy/