Do you Qualify for Bankruptcy?

Written by jessica Alba

qualify-bankruptcy No one will argue that you or anyone else is having trouble paying their bills. Unemployment is on the rise, along with the cost of living. Many people are only a paycheck or two away from economic devastation. Budgets are so tight; any unexpected bill can cause immense financial difficulties. Then, it comes to the point of shuffling the bills and deciding who gets paid this month. It gets to the point where you just want out from under the mountain of debt. But, do you really qualify for bankruptcy?

Will the Court Agree?

If you think you are in such a deep pit of financial debt that you will qualify for bankruptcy, it is time to visit a bankruptcy lawyer. You may be surprised. Oftentimes, a professional and unbiased professional can find financial solutions you may not have considered up to this point in time. If you can do something to satisfy creditors and pay your bills, it is far better than filing for bankruptcy and ruining most chances for buying any new items on credit for the next few years. In fact, if you have filed bankruptcy and you want to start a new bank account, chances are you will have to have a cosigner. Your spending power will be strictly limited for 7-10 years.In addition, just because you feel financially swamped and incapable of paying your debts, federal bankruptcy court may not agree. Just because you do your homework and bring lists of your assets and liabilities does not mean the court is simply going to agree and grant your petition. Instead, they will assign a bankruptcy trustee to check out your assets and liabilities. Unfortunately, there are people who will try to conceal assets or transfer them to friends and family, so it will be the trustee’s job to verify whether you truly qualify for bankruptcy protection. Also, you will have to pass the Means test.

Do you Pass?

If your income for the last 6 months has been less than the medium income for your state you will not have to worry about passing the means test. You will not even have to worry about it at all. In most cases, even those that have to pass the Means test will find it nothing more than a pain in the neck.

In short, the Means test is meant to keep people, who have the ability to pay for their debts, from simply walking away from their financial obligations. For example, if you still have an income that is more than average, then you should be able to at least satisfy some of your debt.

Although Social Security benefits and payments to victims of terrorism or war crimes are off limits, any other source of income will be figured into your ability to pay your debt or not. Even if it is not taxable, it is still money that can be used to pay off creditors. Even scholarships, prizes, gifts and your tax refunds are fair game. You do not have to earn it, for it to qualify as a means of determining whether you qualify for bankruptcy. If you are married, even if your spouse does not also claim bankruptcy, his/her income will be included in the Means test. It is assumed that you also benefit, because you live in the same house. However, if you are separated or living apart for some reason and it is not part of your budget, it will not count. But, do not think of splitting up temporarily, just so you will qualify for bankruptcy. Like concealing or transferring assets, it will only get you in more legal trouble than you want to consider.

You will also have to answer an extensive questionnaire concerning your income. It is comparable to filing out the long form tax return information. It will take some time, but it is absolutely necessary. Of course, you will need to consult your lawyer, whether some monies should be included or not. Some exceptions do apply, like veterans’ benefits.

Once you figure out your income, you are half way there. Now, you have to calculate your expenses and determine what qualifies and what does not take away from your income. You will be allowed to deduct those expenses that are unavoidable, like taxes, payroll deductions, insurance, child support and care, and health care. As you can see, the means test is pretty detailed. It really gets down to the financial nitty gritty of your case.

So, once you pass the Means test, you will automatically be able to file bankruptcy right? Not necessarily. In fact, your whole case can be thrown out, if the court feels that you have abused the system in any way. Now you can see why it is so important to get a bankruptcy lawyer and make sure all of your assets and liabilities are clearly included in the case. You will most likely qualify for bankruptcy, but you want to make sure everything has been considered and it is all on the legal up and up. Then, you can feel comfortable about getting a fresh start at a brighter future.

< Prev		Next >

Bankruptcy Law: New Laws for Chapter 7,11, 13

Will the Court Agree?

Do you Pass?

Popular Articles

Main Menu