While the processes of filing for and going through a bankruptcy may seem complex, there are a number of common elements which are easily identified that necessitate pursuing it as a means of financial restructuring. If you are struggling to decide which financial strategy is best for managing your debts, here are five reasons people typical opt for filing bankruptcy.
1. Higher Debts than Income
If you are unable to pay your debts through any other means, filing bankruptcy is often the most suitable option. You may have the opportunity to eliminate debts or negotiate better terms on repayment with your creditors. Depending on your income and debt level, you could qualify for either Chapter 7 or Chapter 13 when filing bankruptcy.
2. Dischargeable Debts
Dischargeable debts may include credit card and other types of debt than may be considered as unsecured. For debtors who are struggling with mortgage repayments, filing bankruptcy can allow them to surrender ownership of a home in order to eliminate or reduce the associated debt. You usually cannot include things like alimony, student loans, and income taxes within a certain time period as dischargeable debts.
3. Perpetuating Circumstances
Sometimes financial circumstances are so dire that they are perpetual or unlikely to change in the immediate future. When this is the case, filing bankruptcy is often the most viable option. Under certain Chapters, liquidation may apply to non-exempt assets which will help you replay a percentage of the debt owed. You will need to consult with a bankruptcy lawyer to explore which approach is most suitable in your circumstances.
4. Time Elapsed since Last Filing Bankruptcy
There are time restrictions in place to prevent persons or companies from abusing the process of filing bankruptcy. You can file for Chapter 7 bankruptcy every eight years; however, you must then wait an additional four years from that filing before being eligible for discharge in a Chapter 13 bankruptcy. Similarly, you cannot file for Chapter 7 bankruptcy if you have received a discharge in a Chapter 13 bankruptcy, filed within the previous six years. However, in some circumstances, you may be able to file a Chapter 13 case and receive court protection even if not eligible for discharge.
5. Good Standing
Filing bankruptcy is not intended to punish those who honestly fall behind when paying debt. However, the system is designed to help prevent people from using bankruptcy as a way to create huge amounts of debt that they never had any intention of paying. A court is highly unlikely to allow discharge of a debt if enough evidence exists to suggest the debt was acquired through the purchase of luxury items and other financially frivolous spending although such cases are rare If you are a person or company in good standing, with debts that are due to issues such as poor financial structuring or poor circumstances, there is a greater chance the court will approve discharge of your debts.
Lehman Franklin and Kimberly Ward are highly experienced bankruptcy lawyers who can provide you with expert consultation. The firm of H. Lehman Franklin, P.C. is here to help our clients determine whether filing bankruptcy is a feasible option and support them through the process. Call today so we can provide you with the level of advice and guidance you deserve.