Making the decision to file for either a Chapter 7 or Chapter 13 bankruptcy can be a daunting task. If you feel like bankruptcy may be the right option for you, it is important to take the time to assess your family’s finances. Then, you should learn about the typical steps necessary for both a Chapter 7 and a Chapter 13 bankruptcy before you begin.
- Assess your Income and Assets.
Take note of all the income you have received in the past 6 months, whether that be from a job, family member, investments, etc. take inventory anything you own that has value such as cars, a home, art, collectibles, and any personal possessions. Finally, make a list of all monthly bills like rent, mortgage, etc.
- Research property exemptions.
Every state has their own exemption laws that determine what kind of property can be kept even after a Chapter 7 bankruptcy is filed. For example, normally in Texas, most personal belongings are considered. Also, a person’s homestead is exempt.
- Review your debts.
Take a careful inventory of all your incurred debt to determine if your debts are secured or unsecured. Typically, a secured debt is one that has been collateralized by an asset. This means you have agreed to hand over the asset if you default on payment and cannot cure the default. It is also important to know that some debts, such as child support obligations, are not dischargeable in bankruptcy, while other debts can be eliminated, such as most credit cards, medical bills and signature loans.
- Consider your household income for qualification purposes.
The bankruptcy courts will usually have average household income for the six months prior to the time you file for a Chapter 7 bankruptcy. Some types of income are excluded as well. For example, income that comes from Social Security benefits will often be excluded from a Chapter 7 or Chapter 13 bankruptcy. If your income is more than the median income for a family of your size in your state, you may not be able to file a Chapter 7 bankruptcy, unless you have extraordinary living expenses which are reasonable and necessary.Because of the complexity of various bankruptcy laws, it is highly recommended that you hire a qualified attorney to help you sort through this difficult analysis. Feel free to contact David Packard, who is a board-certified bankruptcy attorney in San Antonio and has been helping individuals with these challenging decisions for more than 20 years.