Being prepared to declare bankruptcy involves two distinct areas of consideration. First, you must become aware that your financial condition is not going to become magically better. When you are no longer able to pay your bills and creditors have begun to either threaten or carry out more punitive measures, you should prepare yourself mentally. The other way of getting ready is far easier and involves the below actions.
Speak to an Attorney About Your Financial Situation
Nothing compares to the support and advice of a bankruptcy lawyer. Once you provide the lawyer with your financial information, you can find out what bankruptcy can do for you. For example, not all debts can be forgiven with a chapter 7 filing. Debts like back child support and some tax debts will remain regardless of a filing. It's important to understand exactly how much of your debt can be discharged with the filing. Additionally, you will need to know what might be in jeopardy with a filing. A chapter 7 filing might mean the forfeiture of property, like a car or your home. You must know what is at stake and weigh your options before you make your filing decision. Usually, bankruptcy lawyers offer a free consultation for those in financial distress.
Understand How Your Income Could Affect the Filing
The bankruptcy code prevents consumers that make too much income from filing for a chapter 7 bankruptcy. The cut-off is the median income for your state of residence. If you make too much to file, take heart—you may still have options. For those with larger incomes, you will undergo what is known as means testing prior to filing. Filling out the means test means listing your debt obligations and how they reduce your income. If the means test shows that your income falls within the acceptable range, you can file. If not, you may need to wait six months and try again. Additionally, you might want to consider filing a chapter 13 bankruptcy rather than 7, since income is irrelevant with 13.
Take the Credit Counseling Class
There are two required classes, and credit counseling should be completed prior to filing. Like the means test, this exercise involves preparing a budget based on your current financial situation. Don't hold back—list all of your debts, regardless of how depressing or embarrassing it might be. Your submitted information is reviewed by a professional credit counseling agency and evaluated for need. If the budget shows that you are in enough of a bind and cannot pay your monthly obligations, you will be given the OK to file.
Contact a law firm like Merna Law to learn more.