If you’ve been trying to keep up with your debt, you may be unsure where to turn for relief. You may wonder if you qualify for bankruptcy, how it works, or if it’s even an option for you. I’m here to help assess your overall situation and explore all of your options before making any decisions. That way, you can confidently move toward a future of financial freedom.
What is the Means Test?
During your first appointment with a bankruptcy attorney, the two of you will begin looking at your debt, income, assets, and living expenses. This is in order to decide if bankruptcy is the best choice for you. This information will be used to conduct the Means Test. This tells you if you have enough disposable income available to pay off your debt in a reasonable time. If you do not, you pass the test, and you can then decide which chapter of bankruptcy best fits your situation.
Passing the Means Test – Chapter 7
If you pass the Means Test, a Chapter 7 may be the best fit for you. This type of bankruptcy discharges most unsecured debts. Unsecured debt includes medical bills, credit cards, personal loans, and past due rent and utilities.
Your secured debts do not need to be included, as long as you can keep up with the payments. An example of a secured debt would be your automobile. Some people decide they have overextended themselves with their car payment and use bankruptcy as an opportunity to get out of an unaffordable loan.You may or may not be able to keep your home, and is an important conversation to have with your bankruptcy attorney.
Your priority debts must be paid in any type of bankruptcy. These payments include child support, alimony, student loans, and back taxes. One additional benefit of choosing Chapter 7 is that this type of bankruptcy is fairly simple and is resolved quickly. You could be free of your unsecured debts in a matter of months.
The Alternative – Chapter 13
If you don’t pass the Means Test due to your income, this doesn’t mean that you won’t be able to use bankruptcy to get a handle on your debt. A Chapter 13 restructures your debt and allows you to make payments based on your budget for 3-5 years.
The court trustee will distribute your payments equitably to your creditors, and at the end of your plan, most types of debts are discharged completely. You’ll be able to keep your property and will end up paying much less than you originally owed.
Take Action & Discuss Your Options
This basic overview will give you an idea of how bankruptcy works, but each case is unique and must be evaluated individually. When you work with an experienced bankruptcy attorney, you can be certain that all of your paperwork is filed correctly, no details are missed, and your debt is taken care of while your property is preserved.
When you meet with an attorney, take the time to share your story. Explain what has brought you to the point of considering bankruptcy. You and your attorney will take a look at the overall situation, exploring alternatives to bankruptcy. First thing usually being to work with creditors and revising your budget.