When individuals are considering bankruptcy as a consumer, there are two options they should consider. Chapter 7 and Chapter 13 bankruptcy are processes that can be useful for individuals to restructure their finances. These options can give people the opportunity to improve their financial situation. With these two options, individuals will be able to prepare a financial plan to help their current situation.
Do I need to be eligible Chapter 7 bankruptcy?
Before filing for Chapter 7 bankruptcy, individuals have to go through credit counseling and attend a debtor education course to better prepare themselves. After that is done, they must pass a means test. Through this test, it compares their income to the median income in the United States. To be eligible to claim bankruptcy, their income should be below the median income.
Once you have met the eligibility requirements, a petition for bankruptcy must be filled out. In this document, you will be required to list all your debts, an account of your income, monthly living expenses and a list of assets. When the paperwork is complete, an automatic stay goes into effect immediately.
How does Chapter 13 bankruptcy proceed?
The process of Chapter 13 bankruptcy is very similar to that of Chapter 7 bankruptcy. Eligibility requirements need to be met first to continue with the process. These requirements include credit counseling 180 days before filing for bankruptcy. If you previously filed a petition that was dismissed within that 180 days, you cannot file again.
Once you file for bankruptcy, you should include documents that list liabilities, assets and property, a statement of financial affairs, a list of executory contracts and unexpired leases, proof of credit counseling and any plan developed to handle the matter, income payments within 60 days prior to filing, monthly net income and any indication in a rise of income or expenditures and interests the debtor has in state or federally-qualified education or tuition accounts.
An automatic stay goes into effect for Chapter 13 bankruptcy as well. Once the paperwork is completed and filed, the automatic stay will go into effect immediately.
What is the automatic stay?
When filing for bankruptcy, individuals will have an automatic stay that goes into effect upon filing. The automatic stay bars creditors from harassing debtors. Creditors are not allowed to contact individuals in pursuit of compensation for their debt. This can give individuals the space they need to create a repayment plan. No longer will debtors have to face the stress of dealing with harassment from creditors.
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