Those debtors looking for legal protection from their creditors should give bankruptcy some thought since it gives them flexibility should they default to pay their payments. To be able to qualify for bankruptcy, though, you have several requirements. Understanding these clauses will help every person choose whether declaring bankruptcy is a suitable debt relief option.
What is bankruptcy?
A person, company, or other entity can legally get relief from its debts through bankruptcy.
Anyone can file for bankruptcy; it is not always the case that a wealthy person or a big organization will do. Regarding who may file, the primary criteria concern:
While U.S. citizenship is not necessary, you have to live, run a business, and own assets or debts in the United States.
Including individual entrepreneurship, partnerships, and incorporation, it is relevant for most forms of business and operations. This is not the case, though, since some exclusions exist for municipal businesses, insurance companies, and banks.
You can file for bankruptcy on behalf of a company, on a joint petition including your spouse, or just for yourself.
Chapter 7: qualifying for the means test
You have to satisfy the Chapter 7 means test if you want to claim Chapter 7 which eliminates most forms of debt. This test evaluates the median income of persons with comparable household size in your state and the average monthly income over the preceding six months.
You should give Chapter 7 bankruptcy some thought if your gross income is less than or near the state median. If it is substantially higher, Chapter 13 could be used and you will have to make a designated monthly payment.
finishes Pre-Bankruptcy Credit Counseling
Usually, you have to go to a credit counseling session 180 days before submitting your bankruptcy documents. This course will teach you how to handle your money and other debt help programs among other skills.
You will get a certificate upon course completion to prove that you have faithfully finished it. You cannot apply for credit counseling on bankruptcy without this certificate. It must be sought to a finish even though you could learn that bankruptcy is not the greatest course of action for your circumstances.
Providing Essential Information
You have to show proof of your present financial condition including when you file the bankruptcy filings. You have to show proof of your present financial condition including when you file the bankruptcy filings.
Pay stubs or, if self-employed, the most recent profit/loss records demonstrating capacity for mortgage payback.
The remarks of every due and payment account.
Documentation of various assets including real estate, automobiles, checking, savings, 401(k), IRA, etc.
The most current year's tax records
One could say that Attending a credit counseling session and getting a certificate of completion is one approach to engaging a counselor in helping you find strategies for debt pay-off.
Along with a copy of your Social Security card, you will also be requested to complete a copy of your identification, such as a driver's license or another type of I.D. with a picture. Regarding documentation, thoroughness, and accuracy enable the case to proceed without problems. Should you neglect to submit part of the required documentation for the court, your case will be either dismissed or delayed.
Dealing with the Good Faith Filing Standard's Requirements
To guarantee that submitting a bankruptcy petition complies with the criteria of "good faith filing," Courts are entitled to review the entered petitions. This enables one to monitor illegal or abuse of the bankruptcy law. Included among the factors examined are:
Your income and expenses—that is, the means of earning your living and your spending patterns.
- Elements causing financial crises
Following the documents turned in Regarding documentation, the following are quite important:
You have to show the court that you truly need bankruptcy and that you are filing from the appropriate angle. The present guidelines state that most petitions failing the criteria of good sincerity are usually turned down.
Though a means of escape for those with debt, bankruptcy has legal obstacles that you must satisfy if your case is authorized as was already noted. It shows that you have invested time to ensure you satisfy all criteria so the bankruptcy court may approve your petition and you may begin anew.
