Filing for bankruptcy may offer a golden opportunity to restart your financial life. In fact, millions of Americans have taken advantage of personal bankruptcy in order to settle or eliminate their debts.
There are, however, a few requirements you must meet in order to file for bankruptcy. These requirements are intended to limit the use of bankruptcy to those who truly need it, and keep people from abusing the system. In addition, there are different requirements for Chapter 7 and Chapter 13 bankruptcy, and these requirements are different in every state.
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As mentioned above, there are two forms of personal bankruptcy, Chapter 7 and Chapter 13. First, the Chapter 7 law is designed for people who simply don't have the income needed to pay back deep debt. This is typically the fastest form of bankruptcy.
The types of debts that may be discharged through Chapter 7 bankruptcy include medical bills, utility bills, some personal loans, and payday loans. In addition, this type of bankruptcy offers the protection of the automatic stay, which prevents creditors from harassing you during the bankruptcy process.
However, before you may file you must meet the requirements, including:
These requirements for bankruptcy are intended to reserve Chapter 7 bankruptcy for people with limited income. Those who have steady incomes but are stuck with debt from things like home mortgages and car loans are usually better suited for the second type of personal bankruptcy, Chapter 13.
Chapter 13 bankruptcy is generally well suited for people who have suffered a financial setback but maintain the ability to make some debt payments. Unexpected events that sometimes lead to Chapter 13 bankruptcy include medical emergencies, job losses, and divorces.
During a Chapter 13 filing, you and the bankruptcy court will restructure your debts into a more manageable plan. In addition, you should also get the benefit of the automatic stay.
In order to file for Chapter 13 bankruptcy, an individual must have a relatively steady source of income that allows him or her to make regular debt payments while still having enough cash to meet daily living expenses.
Other requirements for Chapter 13 bankruptcy include mandatory participation in credit counseling and completion of a financial management course. Once you’re eligible to file, Chapter 13 bankruptcy may help you:
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