With the current economic situation, more and more individuals are struggling financially and facing the possibility of bankruptcy. Increasing debt can feel insurmountable, and bankruptcy might be the best option for recovering financial independence once again.
However, filing for bankruptcy can be a daunting and overwhelming process, as it not only affects one’s finances but also can carry with it a negative stigma. At Rulon T. Burton and Associates, we’re here to reassure you that filing for bankruptcy doesn’t have to be a bad thing. And by understanding the key factors that can help get your bankruptcy filing approved, you can navigate through this difficult time with confidence and minimal stress.
In this blog post, we will dive into some essential elements about bankruptcy to ensure your filing is successful. From understanding eligibility requirements to gathering the necessary documents, we’ve got you covered. So let’s get started on your journey toward financial stability.
Introduction to Bankruptcy and Its Purpose
When faced with overwhelming debt, bankruptcy may seem like a scary prospect. Where do you start? Which type of bankruptcy should you file? It’s important to understand that bankruptcy laws exist to help individuals and businesses get a fresh start.
What Bankruptcy is For
The purpose of bankruptcy is to provide a legal process for resolving unsecured debts and allowing the debtor to reorganize their finances or make a plan to repay creditors. Bankruptcy can also protect individuals from creditor harassment and collection actions. There are different types of bankruptcy, each with its own eligibility requirements and benefits, so it’s important to seek the guidance of a qualified bankruptcy attorney to determine the best course of action for your specific situation.
Understanding the Different Types of Bankruptcy
Different financial situations will determine which type of personal bankruptcy you file. There are a variety of factors that need to be considered before filing for bankruptcy, and it is crucial to have a basic understanding of the different types available.
Chapter 7 and Chapter 13 bankruptcies are the most commonly filed. Here’s a little more information on each:
Chapter 7 Bankruptcy
Chapter 7 bankruptcy, also known as liquidation bankruptcy, is designed for individuals who cannot pay off their debts. This type of bankruptcy allows for the elimination of most unsecured debt, such as credit card and medical bills, through the liquidation of unprotected assets – such as equity in homes, vehicles, and other non-essential items.
Chapter 13 Bankruptcy
On the other hand, Chapter 13 bankruptcy, or reorganization bankruptcy, is designed for individuals who have a regular income and can pay anywhere from a small portion of their debts to all of their debts through a repayment plan. This type of bankruptcy allows individuals to reorganize their debts and create a manageable plan for debt payments over the course of three to five years. Sometimes people can keep things in a Chapter 13 for a lower cost than in a Chapter 7.
Why Do People File for Bankruptcy?
It’s common to have debt, but sometimes it becomes unmanageable. Many factors can lead people to file for bankruptcy, but the most common reasons for filing include:
- Unemployment
- Medical bills
- Change in marital status
If these are sudden changes in life circumstances, it can be especially difficult to keep up with expenses, which leads to people drowning in debt that they can’t pay off.
How to Choose Which Bankruptcy to File
If it isn’t clear which chapter you should file, get in touch with the bankruptcy experts at Rulon T. Burton. We offer free consultations for first-time filings and can help you get a fresh start with the right filing.
The Eligibility Requirements for Filing Bankruptcy
How do you know if you’re eligible to file for bankruptcy? Well, for Chapter 7 there’s a “means test” that gives you the green light so long as you are ok with the consequences. Most individuals qualify for a Chapter 13 if they have income and do not exceed the debt limits.
What is the Means Test?
The means test determines if your income is below the median for your state. If it is, then you’re eligible to file for Chapter 7 bankruptcy. Additionally, if your financials show that your income isn’t sufficient to allow you to ever have enough money to pay off existing debts, you will probably qualify for Chapter 7.
Total Debt Limits
When considering Chapter 13, you’re usually eligible if your secured and unsecured debts are less than $2.75 million. Also, if you don’t pass the means test, this is your best option when considering bankruptcy filings. The breakdown is as follows:
- Secured Debts: $465,275 or less
- Unsecured Debts: $1,395,875 or less
The Importance of Having Accurate Financial Documents and Information When Filing for Bankruptcy
Even if you pass the means test or have debt totals that qualify you for bankruptcy filing, submitting proper documentation is crucial for being able to continue through the process successfully. Because there is a lot of paperwork involved when filing for bankruptcy, it’s helpful to have a bankruptcy attorney on your side.
What documentation do you need to file for bankruptcy? Here’s what you’ll need:
- Bank statements for the last three months
- Tax returns for the last two years
- Pay stubs that reflect the amount and frequency of the debtor’s income (six month’s worth)
- A detailed list of assets and liabilities (living expenses, investments, home value, vehicle value(s), credit card debt, student loans, etc…)
- Driver license
- Social Security card
The court uses these documents to fully understand your financial situation, including income, expenses, and outstanding debts. Inaccurate or incomplete information can lead to delays, dismissal of your case, or even allegations of bankruptcy fraud.
Transparency with your attorney enables them to provide the most appropriate advice and develop an effective strategy for your bankruptcy case. Meticulous record-keeping and honesty are vital in ensuring a smooth bankruptcy process and helping you achieve a fresh financial start.
Factors that Can Increase Your Chances of Getting Your Bankruptcy Filing Approved
What are the things you can do to increase your chances of getting your bankruptcy filing approved?
- Hire a qualified bankruptcy attorney: Not only can they guide you through the complex legal system and ensure that all necessary paperwork is filed correctly, but they can also provide invaluable insight on bankruptcy law and advice regarding your options.
- Carefully review and complete all necessary documentation: Providing accurate and comprehensive financial information is essential for filing approval.
- Attend credit counseling: This is a legal requirement in order to file.
- Fill out a bankruptcy packet in full: We provide a free bankruptcy worksheet that you need to fill out completely to file bankruptcy. Filing fees are required as well.
By ensuring that you have fulfilled these requirements, you can give yourself the best possible chance of success in your bankruptcy filing.
What To Do If Your Bankruptcy Petition is Denied
Being denied your bankruptcy filing can add even more stress and uncertainty to an already overwhelming situation. If your bankruptcy filing is denied or dismissed, there are several steps you can take to address the issue.
- Determine why your filing was denied and address any issues that may have caused the denial.
- Consider hiring a bankruptcy attorney to assist in navigating the process, as they can offer guidance on appeals and navigating the legal system.
- Review your financial situation and consider alternative options such as debt counseling or negotiating with creditors.
In some cases, if your Chapter 7 bankruptcy is dismissed, the debts may be ineligible for inclusion in additional filings in the future. However, you may be able to include them in a Chapter 13 case if you meet other eligibility requirements.
Common Reasons Why Bankruptcy Cases Are Denied
There are a few things that negatively impact a bankruptcy filing and may be cause for denial:
- A debtor doesn’t attend credit counseling
- The debtor wasn’t honest about their financial standing or income
- Debtor attempted to defraud the court by withholding information about assets
- The debtor had a Chapter 7 filed in the past eight years
Addressing Common Misconceptions About Bankruptcy and Its Effect on Credit Score
There are numerous misconceptions surrounding the impact of declaring bankruptcy on credit scores, causing many to avoid it as an option. Contrary to popular belief, bankruptcy does not necessarily mean an end to a good credit score.
While it is true that filing for bankruptcy can significantly lower credit scores, with time and proper financial conduct, a bankruptcy can be removed from a credit report. It is important for individuals to understand that while bankruptcy is not a quick fix, it can provide relief from debt and foster a fresh financial start.
The Importance of Thorough Preparation for Bankruptcy Filing
Don’t try to navigate the waters of bankruptcy alone. The importance of thorough preparation and the advocacy of a bankruptcy lawyer cannot be overstated when it comes to a successful outcome.
Preparing for a bankruptcy filing involves gathering all the necessary financial records, completing the required paperwork, and understanding the legal provisions that apply to your case. This thorough preparation will ultimately help ensure that your bankruptcy filing is successful and that you can move on toward a brighter financial future.
The process of filing for bankruptcy may seem daunting and overwhelming, but with proper understanding and preparation, it can provide a fresh start to those struggling with overwhelming debt. From understanding the different types of bankruptcy to being aware of eligibility requirements and factors that can increase your chances of getting approved, it is crucial to gather all necessary information and accurately present it during the approval process.
Remember, seeking guidance from a bankruptcy attorney or attending credit counseling can greatly improve your chances of success. And if your filing is denied, don’t lose hope. Take the necessary steps to appeal or make improvements in your financial situation before reapplying.
In the end, the key to a successful outcome for your bankruptcy filing is thorough preparation along with approaching the process with patience, honesty, and determination. Make informed decisions and take control of your financial well-being – it’s never too late to turn your financial situation around. Take charge of your financial future today by gaining a clear understanding of bankruptcy and its processes!