Bankruptcy is often the last option that someone who is struggling financially considers. They may explore every viable alternative before bankruptcy becomes something they want to consider.
Yet, when people realize that they have fallen too far behind on their debts to catch up and worry about snowballing debt or the loss of collateral property, filing for personal bankruptcy can be a smart financial decision. A successful bankruptcy leads to an automatic stay when someone files to prevent collection activity and ends with a discharge of qualifying on secured debts.
Chapter 7 bankruptcy is the fastest solution for overwhelming financial obligations, but not everyone in the Las Vegas area struggling with their financial obligations qualifies. There are strict limits on Chapter 7 bankruptcy filings.
How can people determine whether they are eligible for a Chapter 7 filing or not?
By performing a means test
The only way to pursue a Chapter 7 bankruptcy is to pass the means test. Means testing is a process in which someone adjusts their household income by reducing the income based on certain household expenses. They then compare that adjusted figure with the current median income reported in their state for their household size. Someone at or below the median income level for their state may be able to move forward with a Chapter 7 bankruptcy. Those right on the edge of qualifying may want to go over their financial records and calculations with someone familiar with the bankruptcy process, as they might be able to qualify.
By looking at vulnerable property
Some people refer to a Chapter 7 bankruptcy as a liquidation bankruptcy. The trustee overseeing the bankruptcy can potentially sell off or liquidate certain non-exempt assets to repay creditors. Thankfully, there are exemptions available that allow people to protect home equity, retirement savings and other valuable resources. Comparing an inventory of personal resources with the available exemptions can help people determine whether a Chapter 7 filing may be beneficial or if a Chapter 13 filing might be a better option given the value of their personal holdings.
Choosing a Chapter 7 bankruptcy may help those struggling financially to regain control over their circumstances. Filers who understand the requirements for a Chapter 7 bankruptcy can explore their options more confidently.