Even though filing personal bankruptcy may be necessary in many cases, you should definitely study all your alternatives carefully before making the final decision. Bankruptcy could be a lifesaver for those who are overwhelmed with their debt obligations and don’t see any other way out. However, there are many things to keep in mind regarding bankruptcy.
First of all, you should be aware that Congress passed a new bankruptcy law in 2005 which established some additional restrictions and regulations for chapter seven bankruptcy.
If your hope is to completely do away with your current debt problem, then you are looking to file chapter seven bankruptcy. This is what most people think of when they hear the term bankruptcy. According to the credit industry (who lobbied Congress for the new law), people have been abusing chapter seven, and this new law attempts to rectify that.
The new bankruptcy law established a means test which means that you have to go through a more intense process in which you document your income and expenses. If your income is less than the median income for your state, then this test will not apply to you because it is obvious that you don’t make much money.
If you have a higher salary compared to other families in your state, you’ll have to undergo the aforementioned means test in order to qualify for chapter seven bankruptcy.
There’ll be some more steps to take including mandatory credit counseling which is meant to help you prevent these financial problems in the future.
In case you’re wondering what happens if you don’t pass the means test, the other option will be to choose chapter 13 and create some sort of payment plan instead of just wiping out your debt.
Whatever you decide, make sure that you discuss your case with a good bankruptcy lawyer that can give you insights into how the law applies to your particular set of circumstances.
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