Chapter 7 bankruptcy is not available to all individuals. In fact, you must pass a rigorous test to demonstrate that your income is insufficient to repay your debts. This test, also known as the means test, helps eliminate individuals who could repay their debts through a Chapter 13 repayment plan. In the end, you are responsible for your debts, and although bankruptcy is a helpful instrument, it should not be abused.
If you are filing for bankruptcy as a married couple, your income becomes incredibly essential. In general, filing jointly will result in a higher combined income, which could disqualify you from eligibility. If the majority of your debts are individual debts, you may want to file separately from your spouse to increase your odds of Chapter 7 eligibility. However, if the majority of your debts are jointly held, you may not be able to file separately.
Most people's greatest concern is the dread of losing their assets in bankruptcy. Generally, many of your assets may be exempt from liquidation during the bankruptcy process, owing to the generous exemption laws. In certain instances, creditors may be permitted to liquidate certain assets in order to satisfy a debt. This does not, however, imply that your assets will be seized and liquidated.
In Chapter 7 bankruptcy, the risk of having a secured debt asset liquidated is greater than in Chapter 13 bankruptcy, in which debts are repaid over time. Only a qualified bankruptcy attorney can assist you in determining whether any of your debts are at risk in your Chapter 7 bankruptcy case.
Your Credit Rating
You may be astonished to learn that the majority of credit damage occurs well before you decide to file for bankruptcy. Chapter 7 bankruptcy may, however, make it more difficult to obtain a decent line of credit after filing than Chapter 13 bankruptcy. The reason for this is that creditors prefer borrowers who fulfilled their previous debt obligations as opposed to those whose debts were discharged in a Chapter 7 proceeding. This does not preclude you from repairing your credit and moving forward; however, you may have to work a bit harder to demonstrate that you are not a risk to lenders.
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