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If you are like many people during the COVID-19 outbreak, you either lost your job or didn’t work as many hours as you did before the outbreak. COVID-19 restrictions make it harder than ever for people to keep up with their bills and other financial obligations, and many businesses are folding.
Forbes has predicted a “bankruptcy tidal wave” in the near future as a result of the pandemic. With the virus raging, there is little reason to believe this won’t be the case.
Filing bankruptcy offers a path out of debt so that you can get your life back on track. If you’re considering filing, you are far from alone. In 2019 alone, more than 750,000 people in the United States went bankrupt, and we can expect this number to rise in the future. don’t let the fear of bankruptcy hold you back if you need to use this option. Keep reading to learn more about what you can expect from the process.
Chapter 7 Bankruptcy Restrictions
In the past, most people opted for Chapter 7 bankruptcy when they wanted to get rid of their debts. Chapter 7 wipes away most debts and gives people and businesses a fresh start, and you will be happy if you can choose this option. Those with higher incomes will have to do a combination of Chapter 7 and Chapter 13 bankruptcy or choose Chapter 13. Therefore, the experts at the Law Office of Tripp Scott recommend consulting a lawyer so that they can guide you through the process.
In other words, they must pay off at least some of their debt before moving forward. Also, there are some debts that cannot be discharged. Chapter 7 does not cover taxes, child support, and several other debts. Check with a bankruptcy lawyer to find out more requirements that lawmakers have changed in recent years. If you are in Canada, filing personal or business bankruptcy has a different process. Check this guide about how bankruptcy works in Canada.
Debt Counseling
Debt counseling is now a requirement for those who want to file for Chapter 7 bankruptcy. The United States Trustee Program must approve counseling programs used for Chapter 7 bankruptcy. This debt management counseling program covers budgeting and long-term planning.
Its goal is to help people find a way to manage their debt without filing for bankruptcy. Those who complete the program and still need a way to manage their debts can move forward with the filing, and they will likely have most of their debts removed.
Income
The income test is the first test you must pass before you can wipe your debts with Chapter 7 bankruptcy. With the income test, you must show that your income matches or is below the average income for your area. Look up the income levels in your area to get an idea of where you stand.
You might think you are stuck with Chapter 13 if your income is too high to pass the income test, but that is not the case. An attorney can go over the particulars of your case and advise you of your options.
Means Test
If you don’t pass the income test, you move to the means test. The means test is a little more complicated, but it’s not too hard to figure out. In simple terms, subtract your expenses from your income to see how much disposable income you have each month. If your disposable income is less than a certain amount, you can still file for Chapter 7 bankruptcy.
Otherwise, you will have to file for Chapter 13 bankruptcy. Some cases let you wipe some debts with Chapter 7 and repay others with Chapter 13. Keep your short- and long-term needs in mind before moving forward.
Final Thoughts
If you are behind on your debts and don’t know what you should do, bankruptcy could be an option worth considering. Bankruptcy lets you wipe your debts in some cases. In other cases, you can set up a repayment plan that prevents you from incurring interest on your debt. Follow this link for more general information about bankruptcy law to get the best results possible.
Look at your budget before moving forward so that you can make the best possible choice for your situation, and you will know you made the smart call. You will know the best path to choose if you would like to get the most from your effort.
You may also like: Simple Ways to Avoid Business Bankruptcy
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