Understanding the Pros and Cons of Filing for Liquidation Bankruptcy

Declaring bankruptcy is not a resolution approached casually. Disadvantages exist for filing as do benefits. Not only is a person's credit future put in jeopardy, but likewise it affects his or her self-image and reputation. Although chapter 7 bankruptcy is a fresh start, many people do not know all of what it entails.

Eligibility "Means" Passing the Test

For a person or business entity to qualify for Chapter 7 bankruptcy, income must pass a "means test." The assessment determines whether earnings are under the state-specific median level for liquidation by examining financial records, including any money awarded, expenses, and loans. High-earners who do not qualify must file Chapter 13 bankruptcy for debt relief by making, structured payments to creditors.

Income types included:

wages, commissions, salary, tips, overtime, and bonuses
state disability insurance benefits
gross income from a farm, profession, or business
annuity payments, royalties, dividends, and interest
workers' comp
property income and rents
retirement and pension payments
unemployment benefits
spousal and child support

What Are the Pitfalls of Filing Bankruptcy?

The following circumstances are a few disadvantages of filing:

- Chapter 7 remains on your credit bureau record for up to 10 years.

- Risk losing assets considered nonexempt from getting sold by a bankruptcy trustee who collects and sells filers' property to maximize payments given to creditors. Examples of exempt property include:

Household appliances
A percentage of home or automobile equity
Social security benefits, unemployment compensation, and welfare
Tools or equipment required for a profession or trade
A limited measure of life insurance value
Jewelry appraised below a specified worth

- Inability to get a mortgage.

- Too much disposable income might mean filing Chapter 13 bankruptcy instead. That would delay financial freedom from occurring within the four to six months as with Chapter 7 to it possibly coming three to five years later.


The Good News Regarding Bankruptcy

It is a dark and devastating period in life to get buried so deep under debt that the only real relief is with the liquidating extreme of declaring bankruptcy. However, in as soon as three months after filing, light can begin shining through the murkiness.

After you file chapter 7 bankruptcy, further threats or continued garnishment of wages end due to the U.S. bankruptcy laws' automatic stay. It immediately prohibits creditors from aggressively coming after you once you file. ?The injunction also applies to any foreclosure or eviction notices that may have been threatening your housing security.

People work most of their lives to meet their needs and to gain at least one or two semi-luxurious possessions maybe. Unfortunately, sometimes people cannot pull themselves up out of a sinkhole or swim free of the pull from a Whirlpool to avoid misfortune. That is why a bankruptcy attorney is the best lifeline you can reach out to during a financial crisis. A lawyer can tell you about alternatives and advise you of actions to take, which may allow you to keep hold of your valuable assets, regain control of your money matters and your life.

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