Many people facing financial difficulties choose the option of filing bankruptcy to stop creditor harassment, save their home from foreclosure, discharge unmanageable debt, or give them breathing room while they repay creditors over a three to five-year period.
Filing bankruptcy is complicated and initially requires that you pass a “means” test. Your state will have designated a median income, or average, and you must not exceed that to qualify for a Chapter 7 bankruptcy. If your income exceeds the median, you may still qualify if your disposable income is not above a certain level. Otherwise, your only option is to qualify for a Chapter 13.
For a Chapter 13, your income must be sufficient to pay your creditors over a period up to 60-months. If your mortgage is in arrears, you must continue to pay the current monthly amounts as well as make up the past due amounts.
You do have certain obligations before and after filing bankruptcy. This includes attending a short credit counseling session before filing.
In your petition, you must list all your assets, liabilities, income, monthly expenses, and a list of items exempt from seizure by the trustee. You must also attend a first meeting of creditors where the trustee and other interested creditors may question you about your petition.
After filing, you must also attend a personal financial management class. After the meeting with the trustee, your creditors have 60-days to file any objections; otherwise, the trustee and court will grant you a discharge of your debts.
In a Chapter 13, you will have to wait until the plan period has ended for satisfaction of your obligations.
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