Every year, numerous Kentucky residents find themselves in impossible financial situations. The debt has become so overwhelming that they are on the brink of losing everything. When one reaches this point, it may feel like there is no hope for recovery. The truth is, there is always hope. Chapter 7 bankruptcy is one of the most popular bankruptcy chapters and can provide quick and effective debt relief. But how do you know if you qualify?
Who Can File for Chapter 7 Bankruptcy?
Chapter 7 bankruptcy is also known as liquidation bankruptcy because it involves selling off certain assets to pay off creditors, and discharging the remaining qualifying debts. It is meant for those individuals who truly lack the funds to pay creditors.
To qualify for a Chapter 7 filing you must meet certain income restrictions by passing the Means Test. In order to pass the Means Test, your income must be lower than the state’s median income level. If your income is less than the state’s median or if your disposable income is deemed insufficient to pay debts, you may pursue a Chapter 7 filing.
When Should I Consider Chapter 7?
Chapter 7 bankruptcy can be a great option if you are facing the following scenarios:
- If you have a high amount of credit card debt, medical debt, and other unsecured debts that can be discharged quickly in Chapter 7
- If you are being sued by creditors
- If your wages are being garnished
- If you are facing foreclosure or repossession
If you qualify for Chapter 7, you likely can benefit from many of the advantages of filing, such as putting a stop to collection actions and the discharge of most unsecured debts.
What If I Don't Pass the Means Test?
The reason income level matters is because, with a Chapter 7 bankruptcy, qualifying debts can be discharged immediately upon petition approval. If you do not qualify for Chapter 7, you can file for a Chapter 13 filing, which involves a monthly repayment plan to repay your creditors during a 3 to 5-year period.
For some individuals, if their income level is expected to decrease to below the state's median income, it may help to wait before filing for Chapter 7. An attorney may be able to review your financial situation and advise you on what may be the right option for your situation.
Schedule Your Free Bankruptcy Consultation
If you would like more information about bankruptcy and the different types offered, contact our attorneys to discuss your situation. A fresh financial start may be possible, and we can help you figure out the right way to go about it.
Questions about bankruptcy? Schedule a consultation with our team today.