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Amy Nickson On 4th Apr,16
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 Is chapter 13 bankruptcy right for you? Why?

Ignoring debts can be dangerous for your financial health, you’ll be harassed by the call of the creditors. They can even take legal actions against you. If you’re already going through this phase you need to file bankruptcy in order to resolve the problem. But, which bankruptcy will be the best dose for your debt syndrome? Filing chapter 13 bankruptcy will be a solution and certainly the best option. Why? Lets see..

Eligibility criteria to qualify for Chapter 7 bankruptcy

To file Chapter 7 bankruptcy, you need to go through certain tests to prove that you don’t have other options to pay off your bills. Most of the debtors choose the Chapter 7 bankruptcy which requires liquidation of assets over Chapter 13 bankruptcy which requires you to pay back. The first test is mainly to examine your eligibility criteria which is your monthly income is measured. To file chapter 7 bankruptcy, current monthly income should equal or less than the median income of a household.

Means test

This test is mainly done to determine if you can head for Chapter 7 bankruptcy. You need to calculate your income that’s left with you after you subtract certain amount for making important expenditures and making debt payments. If the amount you’ve left with is more a certain amount, you cannot file for Chapter 7 bankruptcy.

Eligibility criteria to qualify for Chapter 13 bankruptcy

Means test

You have to go through certain tests like chapter 7 to qualify for the Chapter 13 . You need to prove that your disposable income which is after your allowed expenses and debt payments is enough to pay toward Chapter 13 bankruptcy. This is the means test for Chapter 13 bankruptcy.

As per the bankruptcy law, debtors need to put their disposable income in the repayment of debt under Chapter 13 bankruptcy. The debtors are supposed to calculate their disposable income using the allowed expenses by the IRS and not their actual expenses given their income is higher than the median of their state. The allowed expense amount has to be subtracted from the average monthly income for the six months before filing for bankruptcy.

What makes chapter 13 bankruptcy a better option?

  1. There are certain requirements that you need to fulfill to file a chapter 7 bankruptcy. you’re able to know the requirements that you need to satisfy to file a chapter 7 bankruptcy.
  2. If the amount of your monthly pay stubs of consecutive six months prior to your filing date is more than the average income of a household of your state, then you won’t be eligible to file a chapter 7 bankruptcy.
  3. If the disposal income after eliminating your monthly expense from your monthly income is sufficient to make payments on your debts, then you’re not eligible to file a chapter 7 bankruptcy.

Why should you go for chapter 13 bankruptcy?

Below are some factors for which chapter 13 will be the best option for you.

1. You’ll be able to pay your loans

Incase you’ve failed or missed out a mortgage or an auto loans several times, then only chapter 13 bankruptcy can help you to pay off the missed payments. But if you file a chapter 7 bankruptcy, you won’t be able to do so.

2. You can pay off your debts

If the credit collectors are harassing you like hell, then you must file a chapter 13 bankruptcy. Here, you’ll be able to get the protection of the bankruptcy court to prevent you from the harassment of the credit collectors.You’ll get a proper deadline to pay off your debts. If you’re able to follow the guidelines, you can repay your entire debts.

3. You’ll not lose your non exempt property

When you’ll file a chapter 13 bankruptcy, you’ll not lose any property. There is a option to repay the debts from your income. But if choose the other option, you’ll only be able to save your exempt property. You have to give your nonexempt property to the chapter 7 trustee who will sell it and reimburse the amount to the creditors.

Final words

Lastly, before you file a bankruptcy, it is always advisable to check out the steps you need to take to before going for bankruptcy. Hire a bankruptcy attorney who will help you through out the process. Try to hire an experienced and efficient bankruptcy attorney who has dealt with crucial financial matters and can suggest you under which chapter you should file your bankruptcy.

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