Between the years of 2005 and 2017, 12.8 million bankruptcy petitions were filed. Bankruptcy is scary.
No one wants to be thousands of dollars in debt. But there are times when we have little control over where our money has to go. Even some famous people and entrepreneurs had to file for bankruptcy.
Are you in debt and are debating filing for bankruptcy?
While the government will give you some exceptions, not everyone qualifies for bankruptcy. Whether you’re filing on an individual or business level, you should know the qualifications for bankruptcy.
Continue reading and know when to declare bankruptcy.
When to Declare Bankruptcy: Does Your Situation Qualify?
Everyone has a different situation. You can owe a different amount than one person who files, and you can earn a different income from another person.
That’s why it’s best to look at your situation and compare it to the bankruptcy qualifications.
Bankruptcy chapters 7 and 13 are the most common ones. They’re both similar, except chapter 13 requires filing a repayment plan and chapter 7 does not.
For chapter 7, you must:
- Earn less than the median income
- It would take years to pay off your debt
- Your debts are equal to more than have of your income
- Your debt interferes with many aspects of your life (your marriage, health, etc.)
Chapter 13, bankruptcy is more specific. You must have no more than $394,725 in unsecured debt (personal loans and/or credit cards) and have no more than $1,184,200 in secured debt (car loans and/or mortgages).
Do you have to file for bankruptcy, even if you qualify?
You don’t, and there are as many reasons not to as there are reasons not to. For example, filing for bankruptcy takes a toll on your credit. But some overlook these cons because they won’t have aggressive lenders contacting them.
Questions to Ask Yourself
Are you still not sure if you should declare credit? Ask yourself these questions:
- Are bill collectors calling you?
- Are you only able to make minimum payments?
- Are you still using some of these lending options (credit cards, loans, etc.)?
- Are you unable to sort out your finances?
- Have you collected so much debt, and do you not know how much you owe?
- Have you considered debt consolidation?
If you answered “yes” to at least two of these questions, filing for bankruptcy is probably a good idea.
How to File for Bankruptcy
Did you decide to file for bankruptcy? You have two options: voluntarily file or ask a creditor to order you bankruptcy in the courts.
The first option is the most popular choice, but each person and situation varies. It’s recommended you ask a bankruptcy attorney how you should file.
File for Bankruptcy and Get Your Debts Under Control
If you’re swimming in debt, filing for bankruptcy may seem like you’re only option. But you should also know when to declare bankruptcy to ensure you qualify and if filing is really your best option.
Need more financial and legal advice? We cover many topics in these categories.
