When your debt reaches a point where you can’t pay all of your obligations every month, you will start to fall behind. Soon enough, creditors will send you threatening letters, try to repossess your vehicle or even file a lawsuit against you. Losing your vehicle or dealing with a garnishment of your wages could make your difficult financial circumstances even worse.
Bankruptcy can be an emergency solution to an overwhelming financial situation. There are multiple kinds of personal bankruptcy available in Kentucky, although Chapter 13 and Chapter 7 bankruptcy are probably the most common.
Chapter 13 bankruptcy requires that you repay your creditors for several years through the courts, but Chapter 7 bankruptcy leads to a much faster discharge of your unsecured debts. How can you determine if you qualify for Chapter 7 bankruptcy?
Your income determines your eligibility
To qualify for a Chapter 7 bankruptcy, your adjusted income must be below the state median for your household size. Currently, a single person can qualify for Chapter 7 bankruptcy with an annual adjusted income of up to $49,646. This number is calculated based upon your average income for the six months immediately preceding the month that you file bankruptcy.
If there are two people in your family, that amount increases to $59,017, while three-person families can qualify with earnings of $68,293. With a fourth family member, the income cap increases to $82,626. You can continue to add another $9,000 for each additional family member. (Please note that these numbers are subject to change and are based upon gross income.)
Your income is not the only factor. Additional calculations take into account, the amount of unsecured debt that you have, the IRS allowances for basic expenses, and the amount due on your secured debt over the next five years, you may still qualify for a Chapter 7 bankruptcy.
Another important consideration when deciding the form of bankruptcy you pursue is how much property you have. The liquidation of some of your assets may be necessary in your bankruptcy. The trustee could sell off personal property that you are unable to exempt. For those who pass the means test and who would not lose substantial amounts of personal property to the liquidation process, Chapter 7 bankruptcy can be an ideal solution.
It can be hard to tell on your own if you actually qualify
Adjusting your income to determine if you meet the criteria for a Chapter 7 filing isn’t always easy. You might overlook adjustments that could help you qualify or commit mathematical errors.
Professional help when reviewing and adjusting your income can make a major difference in your bankruptcy proceedings. Learning more about the different kinds of bankruptcy can help you stop aggressive collection activity before it affects your life.