You could be entirely broke and yet still be too rich to declare a Chapter 7 bankruptcy. While I am not an attorney, nor is this article to be taken as legal advice in any manner, here are some general guidelines to begin to answer the question in advance of speaking with a bankruptcy attorney licensed in your state. The alternative to a Chapter 7 liquidation is a Chapter 13, a reorganization bankruptcy which is a repayment proposal. Most often Chapter 13 requires you to pay back secured debts and as much of the unsecured debts as possible usually over a five year repayment period.
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Bear in mind that bankruptcy is a federal court process that was created originally by our Founding Fathers to allow the discharge of an individual's debts in the event of catastrophe. Their minds were filled with remembrances of Poor Houses and Debtor's Prisons and had they no tolerance for allowing new found Americans to become entangled in such disastrous ineffective systems. Therefore, while some may consider bankruptcy an unfathomable option, it is a part of our history and was intentionally created at the very inception of our countries' government to protect the individual and allow everyone a fresh start. With the 2005 updates enacted into law, it is possible to view the bankruptcy Chapter 7 option as now only available to the hardest cases with the least resources. All others are being forced into other options.
The banks were enthusiastic lobbyists for a 2005 update to the specifics of how the bankruptcy laws are enforced in their Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. Don't let the words, Consumer Protection Act fool you, these updated laws made it a great deal tougher for anyone to declare a Chapter 7 liquidation bankruptcy. Some may argue this should actually have been called, the Banker's Protection Act.
In order to step into a Chapter 7 bankruptcy your income must be below the median income in your state. If it is not, a means test will be administered to you. The means test will determine your income by calculating your average income from the past six months. For some who may have experienced a recent job loss this average may not reflect their actual present income. Even if someone were to pass the first part of the means test there are additional tests for expenses which may place restrictions on a person's spending. For example, if the court finds that you have $150 or more per month in disposable income that you could ostensibly apply to repaying your debts, you may be pushed into a Chapter 13.
Most general practice attorney firms will also be generally informed of the specifics of bankruptcy law and its application, pick an attorney who specializes in bankruptcy to answer more of your questions.
Filing for bankruptcy will have serious consequences and is not a decision to enter into without significant discovery of its impact on your life, and your future life. Bankruptcy becomes a public permanent record, it stays on your record for life. Some of the negatives are that it may make it difficult to secure jobs which require a clean credit history, more difficult to act freely in basic endeavors such as renting an apartment, buying a car, or applying for a home loan.
In summary, the bankruptcy option is more challenging than ever and requires competent legal assistance. It is more time consuming, requires more documentation and is therefore also more expensive than ever. Oftentimes the final insult to injury is the high cost of declaring bankruptcy.
Is Bankruptcy Right For You? Talk to Bankruptcy Attorneys Free and Confidential. Licensed bankruptcy attorneys are available. Attorneys will call you to discuss your case for free. Find out if bankruptcy is right for your situation.
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