Is Bankruptcy Right For You?

If you are considering filing for personal bankruptcy, chances are that you may have lost your job, have fallen sick, or are simply in over your head dealing with debt you cannot handle. Creditors may be calling you day and night and your stress level may be high. While finding yourself in this position may be nerve-racking, you should take your time to carefully consider whether filing for Chapter 7 or Chapter 13 bankruptcy is the right choice for you.

Many people do not realize that they may not be eligible to file for Chapter 7 bankruptcy, also known as “straight” bankruptcy, because their income is too high. As part of the new bankruptcy laws, debtors wishing to file for straight bankruptcy must pass what is referred to as the Means Test. In brief, under the provisions of this test, if a debtor makes more than the median or average income in his state, it is unlikely the bankruptcy court will allow him to file for Chapter 7 bankruptcy. In the event a debtor cannot file for Chapter 7, the debtor has the option of filing for Chapter 13 bankruptcy, which requires the debtor to enter into a repayment plan over a period of up to five years where the money paid into the plan is used to pay your creditors. In Chapter 13, the finances of the debtor are under the control of a bankruptcy trustee for the duration of the payment plan. This means that if you file for Chapter 13, your financial freedom will be limited and perhaps non-existent for a long period of time.

Even if you do qualify for Chapter 7 bankruptcy and can discharge almost all of his debts, doing so may not be desirable if you own a home, for example. If your state has a low exemption for how much of the equity in your home you are allowed to keep and there is a good amount of equity in your home, you may lose your home. This is because the trustee overseeing your case may decide to sell your home in order to pay off your creditors, in exchange for wiping out most or all of your debt.

These are just a few of the many factors to consider when deciding whether to file for personal bankruptcy. While some of the discussion above may cause you to think twice about filing, you should also keep in mind that bankruptcy brings with it financial relief and a chance to have a fresh start. In addition, many people considering bankruptcies may find that the scenarios described above are not relevant to their personal circumstances.

There are many issues to evaluate before deciding whether to file for bankruptcy, which bankruptcy option to pursue and when you should file. It is a good idea to contact a bankruptcy attorney in your area, who should be able to give you a personal and thorough evaluation of your case and help you decide whether your next step will indeed be filing for bankruptcy.

This information is provided by Natasha Meruelo, Esq. and she alone is responsible for its content. Ms. Meruelo is an attorney in the New York Metro area and is admitted in state and federal court in both New York and New Jersey. She can be reached at meruelolaw@gmail.com or at (914) 517-7565. Please note that this information does not create an attorney-client relationship and is only offered as general information regarding this issue.