Suzanne had never been in debt trouble. Until she got hospitalized and ran a medical bill that, together with credit card debts, left her $37,000 in the hole. Suzanne had no recourse to declare personal bankruptcy so she could maintain her sanity and get a fresh start.
Indeed, in many cases, declaring personal bankruptcy is the only option left to many if only to shield themselves from the collection madness.
You can file for bankruptcy in the US in one of two ways; Chapter 7 bankruptcy or Chapter 13 bankruptcy. In either case, you must have lived in your state for at least three months.
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Chapter 7 requires you to give up some assets and gets you out of almost all your liabilities. Chapter 13 allows you to keep most of your assets and pay back what you can afford over a period of time.
Up until October 2005, it was relatively easy to declare a Chapter 7 bankruptcy which helps get rid of almost all your debts. But creditors lobbied for the passage of the Bankruptcy Abuse Prevention Act and, you guessed it, they got it.
Very briefly, the requirements for filing a Chapter 7 bankruptcy are:
1. You must pass a means test: You must prove that you can't pay even part of your bills. You must hand in your most recent tax return and your income must be below median in your state of residence. Median income is decided using IRS guidelines not your personal expenses.
2. You must prove that you are unable to pay at least a potion of your debts.
3. You must get credit counseling from an approved nonprofit budget and credit counseling agency before filing.
There are other complicated requirements for declaring Chapter 7 bankruptcy, especially when it comes to means test, which are beyond the scope of this article. If the court decides that you are not eligible for Chapter 7 then you have to file under Chapter 13. In either case, Chapter 7 or Chapter 13, it is strongly suggested that you get a bankruptcy attorney. You will also be required to pay court filing fees.
You should know that there are certain debts that can not be wiped out by bankruptcy. These include student loans, child support, alimony, taxes and money owed as a result of drunk driving.
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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