The means test gave bankruptcy a whole new meaning. Before its implementation, bankruptcy meant not having to pay for any debt that you owe. At least, that will be the case when the court finds that you are in a real financial crisis. They will view all your assets and see which ones can be liquidated. That involves the process of selling off valuable assets and the proceeds go to your creditors. Anything that is not paid off will be discharged (or forgiven).
During a financial crisis, some people just want to get out of it - regardless if there will be severe credit score implications. They file for bankruptcy just to get it over and done with.
The government took notice of this and came up with the means test to separate the abusive bankruptcy filers from those who are in a real crisis. This test lists a series of qualifications that should be met. Now, people have two bankruptcies to consider. The first one is Chapter 7 and it is similar to what was described in the beginning of this article.
The other type is known as Chapter 13. This is type of bankruptcy involves a repayment scheme that is similar to debt settlement - minus the deliberate defaulting on payments. It is also something that both you and the creditors will submit to. The court decides everything and the both of you will have no power over the court ruling. The bankruptcy court will look over your finances and your debts and come up with a repayment plan that you have to complete. Once completed, the rest of what you owe will be forgiven and you will be debt free.
To decide which bankruptcy you are qualified for, you need to go through the means test. The initial scrutiny will be on your debts. It will be done by a court appointed official known as the trustee. There are debts can cannot be covered by bankruptcy and the trustee will identify them. Then your income will be checked. If your income is below the median salary range of the State where the bankruptcy petition was filed, then you qualify for Chapter 7. If not, then you will be scrutinized further.
You need to deduct your basic expenses from your income. The income has to be the average of what you received for the past 6 months. For the expenses, you need to know that there is a standard list of what you are allowed to deduct from your income. The expenses for your yacht may not be included in this list.
The difference will be called your disposable income. If there is none left, then you may find that you still qualify for Chapter 7. But if the amount is significant enough, then you will end up with a Chapter 13 filing.
These are your options for bankruptcy, but know that you have other alternatives to get out of debt. You need to consider that there are debt consolidation options that you can look into. These include debt management, debt consolidation loans and debt settlement. They all have specific qualifications too but they will their effects will not be as destructive on your credit score as those of bankruptcy.
During a financial crisis, some people just want to get out of it - regardless if there will be severe credit score implications. They file for bankruptcy just to get it over and done with.
The government took notice of this and came up with the means test to separate the abusive bankruptcy filers from those who are in a real crisis. This test lists a series of qualifications that should be met. Now, people have two bankruptcies to consider. The first one is Chapter 7 and it is similar to what was described in the beginning of this article.
The other type is known as Chapter 13. This is type of bankruptcy involves a repayment scheme that is similar to debt settlement - minus the deliberate defaulting on payments. It is also something that both you and the creditors will submit to. The court decides everything and the both of you will have no power over the court ruling. The bankruptcy court will look over your finances and your debts and come up with a repayment plan that you have to complete. Once completed, the rest of what you owe will be forgiven and you will be debt free.
To decide which bankruptcy you are qualified for, you need to go through the means test. The initial scrutiny will be on your debts. It will be done by a court appointed official known as the trustee. There are debts can cannot be covered by bankruptcy and the trustee will identify them. Then your income will be checked. If your income is below the median salary range of the State where the bankruptcy petition was filed, then you qualify for Chapter 7. If not, then you will be scrutinized further.
You need to deduct your basic expenses from your income. The income has to be the average of what you received for the past 6 months. For the expenses, you need to know that there is a standard list of what you are allowed to deduct from your income. The expenses for your yacht may not be included in this list.
The difference will be called your disposable income. If there is none left, then you may find that you still qualify for Chapter 7. But if the amount is significant enough, then you will end up with a Chapter 13 filing.
These are your options for bankruptcy, but know that you have other alternatives to get out of debt. You need to consider that there are debt consolidation options that you can look into. These include debt management, debt consolidation loans and debt settlement. They all have specific qualifications too but they will their effects will not be as destructive on your credit score as those of bankruptcy.
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