Once you make the difficult decision to declare bankruptcy, you may want to take a few extra steps to ensure that your path toward financial relief is clear. Bankruptcy does provide those with overwhelming debt a way to a fresh start, but not everyone may qualify to file. There are two main stumbling blocks to be aware of before you begin the process, so read on to learn more.
Consider your income. Once upon a time, anyone and everyone could declare bankruptcy, regardless of income level. Nowadays, the bankruptcy courts limit filing to those who do not exceed their state's median income. Using what is known as the "means test", your income is evaluated and those who go over the allowed amount may be barred from filing for bankruptcy. However, you may be able to deduct some of your income if you have unusually high expenses. For example, if you have a higher-than-normal mortgage payment, you may still qualify to file a chapter 7 bankruptcy. There are several other exceptions that allow you to deduct some from your income, such as high medical bills, so speak to your bankruptcy attorney for more information.
If your income is still too high to allow you to file a chapter 7 bankruptcy, you may want to consider filing a chapter 13 bankruptcy instead. This form of filing is more of a debt reorganization plan than a debt forgiveness plan, and there are no median income limit rules. No matter how high your income, you can file for chapter 13. You can assume that well-known and seemingly wealthy people who declare a personal bankruptcy have likely filed a chapter 13 rather than a chapter 7.
Have you filed for bankruptcy in the past? While there is no such thing as a limit on how many times you can file for a chapter 7 bankruptcy in a lifetime, there are limitations about the timing of those filings. If you want to file a chapter 7 bankruptcy, you must wait at least 8 years from the discharge date (not your filing date) of your most recent chapter 7. Do the math to see if you can go ahead and file, or if you must put the filing off for a while. It should be noted that if your most recent bankruptcy filing was never discharged, such as with a dismissal, you can file again after waiting only 180 days (about 6 months).
Speak to your bankruptcy attorney or companies like Demers Gagnier Inc. to learn more.