If you find yourself struggling to pay your debts and are considering filing for bankruptcy, filing for bankruptcy may be your only option. But have you accrued enough debt to qualify? As a bankruptcy lawyer in Hartford, CT from a firm like The Law Offices of Neil Crane, LLC can explain, fortunately there is no qualifying debt threshold – though you should still consider how much debt and other factors you have before filing.
What Kind of Debt Do You Have?
Bankruptcy is meant to discharge your debt, letting you wipe the slate clean so you can start over. But not all debt is treated the same. Unsecured debts, such as credit card debt and medical bills, and secured debt, such as a house or car payments, are usually covered by bankruptcy. But some kinds of debt cannot be covered by bankruptcy.
- Child support
- Student loans
- Debts incurred through fraud
- Debt involving drunk driving cases
However, these debts may be much more manageable if you file for Chapter 13 bankruptcy, which allows you to pay your debts through a repayment plan.
What Is Your Employment Situation?
Your income status is one of the biggest contributing factors to not only qualify for bankruptcy but for what kind of bankruptcy you qualify for. Each chapter considers several different factors.
Chapter 7 bankruptcy requires a debtor to pass the means test, which compares your household income to your state’s median income. On the other hand, Chapter 13 requires you to have some kind of verifiable income to put money towards a repayment plan. You also may not qualify for Chapter 7 bankruptcy if you are newly employed, however, you may be able to convert your case to a Chapter 13.
If you can pay for your debt with your income, you may not need to resort to bankruptcy. Instead, consider talking to a credit counseling agency approved by the U.S. Trustee. They can help you with credit counseling and debtor education.
Can You Negotiate Your Debt?
Many debtors dream of becoming debt-free in five years and filing for bankruptcy is a viable option to meet that goal. However, it may be wise to consider if you can pay your debts without bankruptcy, which will affect your credit score for at least seven years after filing. Another solution may be to work directly with your creditors. They may be able to reduce your debt or create a repayment plan to help you catch up.
Meet with a bankruptcy lawyer today if you are unsure of which path is right for you.