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When Is It Time to File for Bankruptcy?

April 13, 2021

While the idea of filing for bankruptcy can often have a negative stigma, the reality is that many people struggle with finances in their life. Dealing with poor financial situations can often be stressful, as some may face losing their home or not being able to support their family. Filing for bankruptcy can be very beneficial for individuals in these situations because it allows them a fresh start. It can help people during times of financial crisis. If you find yourself in this position, it may be time to speak with an attorney about filing for bankruptcy.

Types of Bankruptcy

There are three types of bankruptcy that an individual may file for. This includes the following:

  • Chapter 7: When filing for this type of bankruptcy, their assets may not be seized. This bankruptcy discharges the majority of an individual’s debt. This means they may not be required to pay credit card debt, personal debt, medical bills, automobile repossessions, and foreclosures.

  • Chapter 13: In order for an individual to keep their assets under this bankruptcy, they must be under the protection of the Bankruptcy Court. This requires them to create a plan to repay their debts over the course of 3-5 years. Once these payments are completed, outstanding debts may be discharged.

  • Chapter 11: A business can file for this bankruptcy to stay open and running. This allows them to continue making an income and keep employees on staff. The business is required to create a 5-year payment plan to restructure its finances and pay debts over time.

Am I Eligible?

There are options to file for bankruptcy that help to alleviate the stress of these situations. Individuals can file for Chapter 7 or Chapter 13 bankruptcy. It is also possible to file for business bankruptcy, known as Chapter 11 bankruptcy.

When filing for Chapter 7 bankruptcy, there are requirements to be taken care of before filing. Applicants must participate in credit counseling through a United States-approved agency within 6 months before filing. They must also take a debtor education course. In order to be eligible, applicants are required to pass a means test that compares their income with the median income of the country. If they are above the median, they may not be able to file for bankruptcy. If they are below the median, they may be eligible.

In order to file for Chapter 13 bankruptcy, an individual must receive credit counseling within 180 days before filing. If they have a petition that was previously dismissed within 180 days, they are unable to file again. An applicant is required to have a regular and disposable income at the end of each month in order to be eligible for Chapter 13 bankruptcy. In addition to this, their unsecured debts cannot exceed $360,000 and secured debts cannot exceed $1,310,000.

Contact Our Firm

If you or a family member is considering filing for bankruptcy and need the help of a skilled attorney, contact Velasco Law Office today.

Juan C. Velasco, Esq. is a trusted attorney who concentrates on bankruptcy, family law, real estate, and estate matters who has been serving the New Jersey area for over 25 years. If you are in need of experienced legal counsel, please contact Velasco Law Office and we will be happy to assist you.