With the fluctuations in the economy, the rising cost of health care, and the high unemployment rate, it is little wonder why so many households decide to file for bankruptcy as a means to get out of debt. In fiscal year 2015 (September 2014 to September 2015), nearly 1.1 million bankruptcy cases were terminated.
Declaring bankruptcy can help people regain their financial footing and get the fresh start they so desperately need. This avenue of relief should also be used in certain circumstances, when all other means of have been exhausted. If you have budgeted, sought debt counseling, and have tried to bring in extra income yet you continue to see your debt rising, it might be time to start looking into your bankruptcy options.
To begin exploring your financial options for getting out of debt, call the Ghai Law Firm at 770-233-7474 and request a free consultation with a bankruptcy attorney in Kennesaw, GA.
Which type of bankruptcy should I choose?
Bankruptcy codes can be hard to navigate and challenging to understand. The federal government provides several types of bankruptcy options, but individuals typically use one of two options. Each type of bankruptcy is detailed in its respective chapter within Title 11 of the US Code, i.e., the provisions for Chapter 7 bankruptcies are found in 11 USC Chapter 7.
Below is a basic overview of the two most common options, although your attorney will be able to best evaluate under which chapter you should file.
- Chapter 7 – In 2015, over 550,000 people filed Chapter 7 petitions. Both business entities and individuals may qualify to use this avenue. It is generally most desirable because you may qualify to keep certain property you want (such as your house and your car), but you can have all your other debts discharged. In other words; you do not have to pay your creditors back.
- Chapter 13 – Those who do not qualify for a Chapter 7 may opt for a Chapter 13. In this type of bankruptcy, you still have to pay creditors back, but you do so under a reorganized debt repayment plan. Just over 300,000 people filed under Chapter 13 in 2015. This type of bankruptcy is only suitable for individuals. One of the benefits of a Chapter 13 is that you are able to keep all of your property, and filing will halt any foreclosure proceedings on your home. Your debts are usually lowered and your monthly payment will be manageable. Most people satisfy their debts with a three- to five-year repayment plan.
Do I qualify to file for bankruptcy?
Each type of bankruptcy has a specific set of eligibility requirements to file. First, if you want to file a Chapter 7, you must be able to pass “the means test,” which is essentially an income threshold. In order to qualify, your disposable income must be below the median income in Georgia.
If you have too much disposable income to qualify for a Chapter 7, you will likely need to file under Chapter 13.
In addition to the means test, there are other requirements you will need to meet before filing. For example, if you have filed for a Chapter 7 in the past, you can only file again if eight years have passed since your first discharge of debts. For a Chapter 13 bankruptcy, you cannot receive a second discharge within two years of the first.
Also, certain debts are not dischargeable, such as child support, student loans, and income taxes. Another factor that can come into play is the cause of your debts. If the bankruptcy court sees that you have a recent history of irresponsible spending, they will likely not discharge your debts. Before starting the process, your attorney can review your history and counsel you on your eligibility.
Do I need to hire an attorney to help me file for bankruptcy?
It is theoretically possible to handle your bankruptcy case pro se (by yourself), but it is not recommended. Bankruptcy lawyers can preempt common errors people make during the filing process and can help walk you through the process much more efficiently than you might be able to manage on your own.
There are dozens of forms to complete, each with rather confusing technical legalese. Identifying which forms you need (there are well over 100 federal forms from which to choose), and ensuring each one is filled out accurately and entirely is not an easy feat for non-lawyers. People who file by themselves often make mistakes that are extremely costly. For instance, if you want to keep your home, but inadvertently forget to list your mortgage information on the correct bankruptcy form and do not take the steps necessary to reinstate your mortgage, you could very easily wind up losing your home in the bankruptcy.
Plus, you will have case-specific questions along the way that are best answered by a legal professional. Which of your debts are dischargeable and which are not? How do you handle co-owned property? Should you file alone or with your spouse? These are all topics your attorney can help you with.
In addition to helping draft and file all the necessary documents, your attorney can represent you in bankruptcy court when the trustee reviews your case. Courtrooms can be unnerving, and you will benefit from having an attorney help you prepare and handle the important details during the hearing.