When debts spiral out of control, bankruptcy can become an invaluable financial recovery tool in stemming the tide and getting you back on the right track. While it’s not for everyone, more than 1.5 million people every year find it to be their only hope of getting a fresh financial start. Debt problems can be the result of unemployment, reduction in income, disability, divorce, or in some cases, poor financial decisions. A financial crisis can happen to anyone at any time. No one is exempt. Bankruptcy is a fact of life. Without it, people with serious debt problems will remain stuck where they are, unable to move on with their lives. Living with stress every day caused by the burden of debt is a horrible way to live. Bankruptcy can offer hope when the future looks bleak.
Because of eligibility requirements for the type of relief being sought, some people will qualify for Chapter 7 to completely wipe out their debts. Others may have no choice but to file Chapter 13 and pay their creditors over a 3-5 year period. Much of it depends on your income and your assets. You also need to take into consideration your purpose in seeking debt relief.
Under the latest rules for Chapter 7 bankruptcy eligibility, your current monthly income must be measured against the median monthly income for a family of your size in your state. If your average monthly income is lower than the median, Chapter 7 may be for you. If your income is higher than the median, Chapter 7 is still a possibility, but there is an additional step. You have to undergo what’s known as “the means test”, a mathematical formula for calculating your disposable income and determining whether it is high enough to help pay off some of your debts. Technically speaking, the test measures your disposable income after subtracting various expenses and payments, and shows whether that amount would be sufficient to make a dent in your unsecured debts over a five-year period.
Chapter 7 will be denied to those who have received a discharge of debts under Chapter 7 within the last eight years or Chapter 13 within the last six years. You may also not be able to file if you were denied a Chapter 7 or Chapter 13 bankruptcy within the previous 180 days. Your eligibility for Chapter 7 bankruptcy may be in serious jeopardy if the court believes you are guilty of defrauding your creditors. Among other actions, this can include transferring assets to friends or relatives in an attempt to hide them from creditors or the bankruptcy court, as well as purchasing luxury items with the knowledge that you couldn’t possibly make the required payments.
Chapter 13 can be the most effective way to consolidate all your debts into one low monthly payment that you can afford. In a lot of cases, most debts are only paid a small percentage of the actual amount owed, resulting in significant reduction- a reduction of 50% or more is not unusual. Even a second mortgage on your home can be reduced or eliminated if your property is “upside down” and the second mortgage is essentially “unsecured” due to lack of equity in your property. With reduced debt payments every month, people who are struggling financially are able to manage their finances better by making sure that they have enough money left over for basic necessities before paying any of their creditors.
If you need help in finding a solution to your debt problems, we can help you figure out your options. Please call Toll-Free 1-866-477-7772. We have offices in Glendale, Cerritos, West Covina and Valencia.
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None of the information herein is intended to give legal advice for any specific situation. Atty. Ray Bulaon has successfully helped over 4,000 clients in getting out of debt. For a free attorney evaluation of your situation, please call Ray Bulaon Law Offices at TOLL FREE 1-866-477-7772.