In Financial Trouble? Know When and How to File for Bankruptcy
Imagine living under Roman law in 450 BC. Now imagine you’re in debt, and own your creditors a significant amount of money. Under Roman law, creditors would have the choice of either selling you into slavery, or even killing you. Fortunately, for the sake of humanity, today individuals have a more civil option for handling their debt – known as bankruptcy. For many, bankruptcy is often viewed as a “fresh start,” although it will not wipe out all debts. Mostly anyone can file for bankruptcy to aid their financial struggles, even large organizations and athletic franchises. In fact, the Pittsburgh Penguins are the only sports franchise to file for bankruptcy twice, in 1975 and 1998.
“How do I file for bankruptcy” is a common question asked by individuals who are in a lot of debt. First, it’s important to consider the amount of debt that you owe. Before you file your case, think about the types of debt you have, and the goals you want to achieve by filing for bankruptcy. For instance, the average foreclosure sales price for a home is around $107,000 USD. Filing for bankruptcy is a good way to save your home from experiencing a foreclosure. Remember, bankruptcy will not clear all of your debt such as priority debts, meaning that filing for bankruptcy may not be in your best interest if all you want to do is wipe out debts that can’t be discharged through bankruptcy.
Similar to questions like “how do I file for bankruptcy,” are questions like “when should I file for bankruptcy.” When should you file bankruptcy is also dependent on adequately preparing yourself and gathering the necessary bankruptcy info and documents first. There are two common filings for bankruptcy, chapter 7 and chapter 13 bankruptcy. Chapter 7 bankruptcy involves the liquidation of a debtor’s property and assets, and then distributes the proceeds to the creditors. With Chapter 13 bankruptcy, debt is restructured, rather than liquidating the debtor’s assets, and the debtor is usually allowed to retain most of their property.
Both Chapter 7 and Chapter 13 bankruptcy have certain eligibility requirements. In order to qualify for Chapter 7 bankruptcy, your income must be low enough to pass the bankruptcy means test. In comparison, eligibility for Chapter 13 bankruptcy is dependent on the amount of your debts, and cannot exceed certain dollar limits. If you fail the means test, you won’t be eligible to file for Chapter 7 bankruptcy, but may still qualify for Chapter 13. Once you have adequately figured out your financial situation, and prepared yourself, if you’re still wondering “how do I file for bankruptcy,” it’s recommended that you seek the professional assistance of an attorney. After a bankruptcy filing, a debtor’s credit rating will indefinitely suffer; however, chances are that the financial circumstances that led to you filing bankruptcy in the first place will have already negatively affected your credit rating. Helpful links.