photo by blakeimeson
Unemployment, divorce and illness are the ‘Big 3 of Bankruptcy’. While all of these are tough to deal with on their own, the financial recourse is often just as troubling. When I first started in collections, I would (and still do) ask people why they have not filed for bankruptcy. These are the people who have 15 or more delinquent accounts, over $100k in revolving debt and truly have no short-term potential of getting out of debt. What are they waiting for? When enough is enough and you’re ready to get the monkey off your back, here are the options:
Filing Chapter 7:
- If don’t have enough assets on hand, then Chapter 7 may be for you. However, you will need to pass the “Means Test” organized by the bankruptcy court – in which your gross income will be calculated for the last 6 months and compared to the average median income of a similar sized family in your area.
- If your income is severely lower and you have no other means of paying off your creditors, then Chapter 7 is for you . In such a case, the court will appoint a trustee who will compile a list of all your non-exempt assets and sell them off in order to pay off your creditors.
- The rest of your debt could be discharged (canceled by the court). However, as an individual, if you do not pass the means test, then you will have no choice but to file for bankruptcy under Chapter 13.
Filing Chapter 13:
- In this case, you will need to come up with a repayment plan to clear off your old debts within a span of 3 to 5 years.
- Filing under this chapter will save most of your assets from being taken away by the court, and you will have a new chance to clear off your debts in a structured way.
- Most people first try to file for bankruptcy under Chapter 7, since some of the debts could be discharged. Under Chapter 7, most cases are settled in 4 months, as opposed to the 3 to 5 years that you would need to clear off your debts under Chapter 13.
Obviously, this is bare bone information. Your personal situation, as always, should be discussed with your attorney. As you can see this is a process that can take several months. Why wait around fearing the next phone call or embarrassment? If money is the issue, see my post on When You Can’t Afford a Lawyer.
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[...] Bankruptcy:The Truth of Credit [...]
No cards are easy to get approved for anymore. Consumer credit lines have now been cut by over $2.5 Trillion (last week’s figures, thru end-July). Credit lines are being reduced or eliminated entirely. New credit is not being extended unless you have excellent credit.
If you can get a new credit card application approved, the amount of the credit limit will depend on your income and amount of credit currently available to you.
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