If you are thinking about filing for Chapter 7 bankruptcy, you need to understand the different criteria you will be judged on. In most cases, your bankruptcy lawyer will let you know immediately you whether or not you are eligible for bankruptcy. In general, your income needs to meet a certain threshold, you must not have filed for bankruptcy during a certain period, and you need to convince the court of your case.
Here are a few scenarios in which you won’t be able to file for Chapter 7 bankruptcy.
Your Income Meets Debt Payment Criteria
Unlike before, there is specific criteria on who can stay in Chapter 7 bankruptcy when it comes to debt repayment. Previously, it was up to the judge to decide whether you are eligible for Chapter 7 bankruptcy. For instance, if the judge believed you to have the income to fund a repayment plan through Chapter 13, then he or she had the power to force you to do so.
There may come a time when you can’t make a business loan payment or fail to make a personal credit card payment on a balance used to fund your company. If talking to your creditors about alternate payment arrangements fail and you have no other options to resolve your debt issues, it may be a good idea to look at bankruptcy. How can a liquidation bankruptcy help a business owner? Learn the answer to this question below:
What Is a Liquidation Bankruptcy?
Under Chapter 7 of the bankruptcy code, debtors have the right to have their assets liquidated and the money used to pay off creditors. For businesses, filing for Chapter 7 bankruptcy means selling off company assets and using that money to pay off creditors up to the amount raised through liquidation.
At first, it doesn’t seem too much of a problem. Your credit card debts are growing and you did miss one debt payment, but you can handle that. As the months go by, however, the debt only gets worse. Finally, you realize you can’t pay your debts at all and your credit line has gone down the tubes. Is it time to consider bankruptcy, and just what does that mean?
As an individual, you may file for a chapter 7 bankruptcy, so named for a chapter of the federal Bankruptcy Code. It is also called liquidation bankruptcy because it allows you to sell some of your property to pay your debts. This process will take about 3-6 months, although it will stay on your credit record for about 10 years.
There are other pros and cons to bankruptcy under Chapter 7. You can keep most of the possessions you own and the wages you earn as well as any property you are able to buy after you file for bankruptcy.