Tuesday, July 20, 2010

Bankruptcy: The Last Resort

Today more than ever people are finding themselves in tough economic dilemmas. The crumbling economy has lead to high unemployment rates and an increase in foreclosures. Businesses are closing down and people are looking for a way out of their money problems. This is why some people have no choice but to file for bankruptcy. There are two types of bankruptcy, chapter 7 and chapter 13. Before filing for any of these keep in mind that it is considered a fraud if a cash advance over $750 was made during the 70 days prior to the case being filed. The same goes for luxury purchases 90 days before the case is filed that total up to more than $500.

In order to qualify for chapter 7 bankruptcy your income must be less than the median income of your particular state. Factors such as what to include in your income and what state you're in determines whether or not you qualify for chapter 7 bankruptcy. When comparing your income to the state median your income is considered as your gross income before taxes. Your spouse's income is also included unless you file separate taxes. The median income of your state depends on the Census Bureau's standard for an individual's personal gross income in that particular state. It also depends on the average income of those who have the same number of people in their family as you do. The median income of your state is also reformed after the last census depending on inflation, etc.

In order to qualify for chapter 13 bankruptcy your application needs to be rejected by the chapter 7 filing because your income is too high. In order to file for chapter 13 bankruptcy, you must have sufficient income and assets so that you can pay off your debts once certain expenses are taken away such as car loans and mortgage. You must have a plan to repay the money and you must prove that you can pay off your debts once the court grants you this wish. You can fund a chapter 13 plan by sources such as salary, income from self employment, social security benefits, unemployment benefits, public benefits, child support/alimony, etc . Also, in order to qualify for chapter 13 bankruptcy your unsecured debts are less than $360,475 and your secured debts are less than $1,081,400.11.

Unfortunately, bankruptcy is not something that anyone wants to face. It is hard once the realization of filing for bankruptcy sets in. With the information provided you should be able to have a better idea of what bankruptcy is and the type of bankruptcy you will file due to your income and further financial situation.