For debt relief, bankruptcy is an important tool. Whether you file for Chapter 7 or Chapter 13 bankruptcy, you can lower or completely erase your debts. If you feel like you can’t escape your debt or that you won’t be able to get on top of other bills because of too much unsecured debt, then bankruptcy is probably on your list of options. How do you know if you’re eligible for bankruptcy?
Do You Make Too Much Money?
When you think about bankruptcy, you also have to think about your income. If you have a higher net worth, your debt threshold is going to be higher than a person with a lower income. Bankruptcy is based on your ability to pay your debts, rather than your income.
If you have a higher income, you do have to prove to your creditors that you are not paying for luxury items. For instance, if you do not have leftover money at the end of the month because of your credit card bills and other expenses, you are typically eligible to file for bankruptcy. However, if you are spending money on luxury goods or services, then you are not going to be able to discharge your credit cards.
Do You File Chapter 7 or Chapter 13 Bankruptcy?
Now, if you do have some money left over after you pay your bills, you may qualify for Chapter 13 bankruptcy instead of Chapter 7 bankruptcy. Both are valid tools that anyone at any income could qualify for, but your financial circumstances will determine which one you should file.
In Chapter 13 bankruptcy, you do not discharge all your debts. You may have to repay all or part of the debts. During the process, you come up with a plan to repay the debts. This repayment plan may last from three to five years.
Chapter 7 Bankruptcy, on the other hand, dissolves all of your unsecured debt. If you filed bankruptcy due to credit cards or medical debt, you do not have to pay them back when the bankruptcy is over. While it does negatively impact your credit, you can start again, free of those debts.
To find out more about whether you qualify to file for bankruptcy, talk with a bankruptcy lawyer, like from Chorches Bankruptcy Law, as soon as possible. Many people worry that they do not qualify because of their income. In reality, even high-earners can file bankruptcy if their debt to income ratio is too high for them to reasonably pay it off.