Personal Bankruptcy Requirements
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Personal Bankruptcy Requirements

Established by federal law, requirements for personal bankruptcy are designed to reserve bankruptcy for people who truly need debt relief the most. If you are struggling with debt, you may qualify for some form of bankruptcy.

There are two main types of personal bankruptcy, Chapter 7 and Chapter 13. As a general rule, Chapter 7 is used by people with limited income and few assets, while Chapter 13 is designed for people with more steady incomes and some assets.

A local attorney may help you determine your bankruptcy eligibility, and whether either form of bankruptcy is your best option. To set up a free consultation with a local bankruptcy lawyer, just fill out the form below.

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Chapter 7 Bankruptcy Requirements

By filing for Chapter 7 bankruptcy, you may be able to eliminate some or all of your unsecured debts. These debts include credit card bills, medical debt, utility bills, payday loans, and some personal loans.

In order to qualify for Chapter 7, though, you must meet some personal bankruptcy requirements. Specifically, bankruptcy laws have established a means test for potential Chapter 7 filers. Here are two primary questions to determine your Chapter 7 eligibility:

  • Is your annual household income less than the median income for a similar household in your state? If so, then you may qualify for Chapter 7.
  • If your income is greater than the median, then do your monthly household expenses prevent you from making significant payments to your unsecured creditors? If yes, then you may qualify for Chapter 7 bankruptcy.

Don't be intimidated by the thought of taking a "test." The Chapter 7 means test is based on a calculation of your income and expenses to see if you can file for Chapter 7. An attorney can help guide you through the process and determine if Chapter 7 is a good fit for you.

Chapter 13 Bankruptcy Requirements

If Chapter 7 is not a suitable fit for you financial situation, you may wish to file for Chapter 13 bankruptcy. In Chapter 13, you'll create a new debt repayment plan and make monthly payments to a bankruptcy trustee.

In turn, this trustee deals with your creditors so you can worry about other things. In order to file for Chapter 13, though, you must:

  • Have a steady source of income, through either wages or a pension.
  • Have less than $360,475 in unsecured debts and less than $1,081,400 in secured debts.
  • Be willing to make monthly payments on a new debt payment plan.

While the Chapter 13 bankruptcy process is different from that of Chapter 7, you may also be able to stop home foreclosure, which is one of the most powerful benefits of Chapter 13.

In addition, once you file for Chapter 13, you should immediately receive the benefit of the automatic stay, which prevents creditors from harassing you during the bankruptcy process.

Also, if you meet the personal bankruptcy requirements and file for Chapter 13, your bankruptcy can allow you to regain control of your finances and pay off debt over a period of three-to-five years.

To learn more about whether you'll be able to meet these personal bankruptcy requirements, connect with a local bankruptcy lawyer today. Simply fill out the case review form below to get started now.

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