A lot of people considering bankruptcy believe it’s a financial option that is always available to them and all it takes is some quick paperwork to make it happen. In reality, bankruptcy is a very strict process which only a few who meet certain financial and life situation requirements qualify for. Betting your financial situation on your ability to file for bankruptcy isn’t the smartest plan if you don’t have all the facts.
Below is some information about what bankruptcy is, what exemptions there are, and the different types that may be available to you.
What is bankruptcy?
Many people look down on bankruptcy as a choice for those who don’t have their finances in order. In actuality, bankruptcy is an option for those who qualify to wipe their financial slate clean. It requires some sacrifice for several years, but the end results in a much better financial situation then before they filed. While there are different chapters and nuances between them, it is essentially a way to allocate resources to paying off debts and prevent harmful bill collection.
What is formal eligibility?
All forms of bankruptcy have their own rules and guidelines that must be followed. To that end, different chapters also have different eligibility requirements. For example, to file for Chapter 7 bankruptcy, a common filing for individuals deep in debt, you must submit to a means test to ensure that you are truly unable to pay back your debts with the court’s intervention. You also must not owe above a certain amount in debt.
What is practical eligibility?
While formal eligibility is fixed in law and true across the board, states can have their own additional eligibility requirements as well as exemptions. This can vary state to state and what court you file in but they are usually additions to the standing formal eligibility requirements such as having no disposal income (Chapter 7) or conversely requiring some form of disposal income (Chapter 13). What is required depends on the chapter you’re filing.
Additional Questions
What is exempt from bankruptcy?
In theory bankruptcy allows collectors to seize assets and finances as a means of paying back on a debt but they cannot touch everything. Each state will have its own laws about what is exempt but some common examples include retirement savings, government benefits, or, in some cases, a “wildcard” exemption that allows debtors to apply exemption to some other asset or financial account.
What are the federal exemptions?
At the federal level, exemptions include government benefits and retirement accounts as well as a certain amount of home equity and motor vehicles that are low in value. The federal government also offers a wildcard exemption option in addition.
If you have questions about bankruptcy or are thinking about filing, an experienced bankruptcy attorney can help. They can help decide if bankruptcy is right for you.
Get the representation and protection you need with the bankruptcy lawyers at Hines Law in Massachusetts. Our 20 years of experience provides sound advice and guidance throughout your debt relief process. We serve clients throughout and beyond the Boston area. Call for a Free Consultation today!