When financial troubles continue to get more serious and stressful, it may be time to consider bankruptcy options. Bankruptcy can help individuals create a financial plan to mend their finances and prepare for a better future that can possibly be one of financial success. Although bankruptcy may have a bad stigma, it is not something that should be avoided since it was created to help people in financial need. Individuals should consider Chapter 7 or Chapter 13 bankruptcy. These two options provide you with the opportunity to get your finances in order.
The means test is part of the process that decides if you are eligible to file for bankruptcy. The means test compares your income with the median income in the country. If your income is below the median income, you may be eligible to claim bankruptcy.
Am I eligible to file for bankruptcy?
Prior to filing for Chapter 7 bankruptcy, individuals must undergo credit counseling by a United States approved agency and attend a debtor education course. Then they must pass the means test. A petition for bankruptcy must be completed where you will be asked to claim a list of all debts, an account of your income, your monthly living expenses and a list of all assets, including real estate and personal possessions. An automatic stay goes into effect once the paperwork is filed.
When filing for Chapter 13 bankruptcy, the process is similar. You need to receive credit counseling within 180 days before filing, but if another petition was dismissed within the 180 days, you cannot file. You should gather documents that include a list of liabilities, assets and property, a statement of financial affairs, a list of executory contracts and unexpired leases, proof of credit counseling and any plan developed to handle the matter, income payments within 60 days prior to filing, monthly net income and any indication in a rise of income or expenditures and interests the debtor has in state or federally-qualified education or tuition accounts. An automatic stay will also go into effect once all the paperwork is filed.
How does the automatic stay benefit me?
When an automatic stay goes into effect, it bars all creditors from contacting you. They will no longer be able to harass you in order to pursue compensation for your debts. This can give you the breathing room you need to create a financial plan. You will not have to face the added stress of creditors constantly trying to contact you, which should relieve some stress.
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