If you're looking for ways to reduce your debt, you may have considered filing for bankruptcy. If so, you're not alone.
Millions of Americans have successfully filed for bankruptcy, and its recent increase in popularity may be a testament to its debt-reducing powers.
You may, however, be concerned about what exactly a bankruptcy court will look at during the bankruptcy process. Listed below are some of the things that bankruptcy courts do, and do not, consider when helping a petition seek debt relief.
Whether a person files for Chapter 7 or 13 bankruptcy, the bankruptcy court usually tries to determine the state of that person's finances.
This inquiry does not involve an embarrassing interrogation into every nook and cranny of a filer's personal life. The bankruptcy court just wants a clear picture of a person's finances so it can act accordingly.
Thus, types of information a bankruptcy court typically looks at include:
In order to begin appeasing a filer's creditors (and protect the filer from creditors during the case), the bankruptcy court must first have a complete list of the type of amount of debts a filer owes.
Further, the court may also consider a filer’s ability to pay the debts without filing bankruptcy, although having a high income does not necessarily prevent someone from successfully filing for bankruptcy.
Of course, other types of information a bankruptcy court looks at depends on whether the filer chooses Chapter 7 or Chapter 13.
In addition, the court's specific concerns may vary according to state bankruptcy law and the rules and practices of a particular court. For more information on local laws, you may wish to contact a local lawyer.
Chapter 7 bankruptcy is usually reserved for people with limited income and few assets who have are looking to discharge certain unsecured debts, including credit card debt or unpaid medical bills.
In this type of bankruptcy, the court will consider the types of property a person owes, and whether those items meet certain bankruptcy exemptions, which vary according to state law.
To determine whether you are eligible for Chapter 7, you'll need to determine if you qualify under the means test. An attorney can help explain this requirement and if you're likely to qualify for Chapter 7.
In contrast, a Chapter 13 bankruptcy generally requires a filer to have a steady income as they will be required to make regular monthly payments on a restructured debt plan.
A Chapter 13 court may also consider whether a filer is facing home foreclosure or is having wages garnished by creditors, as Chapter 13 is designed to help stop both these actions.
For more specific information on what a bankruptcy court looks at in your area, fill out the form below and arrange a free consultation with a local bankruptcy lawyer.