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Written by AskTheLawyers.com™ on behalf of David Shuster with Shuster Law, PLLC.
If you are feeling harassed by bill collectors or credit card companies, it might be time to consider filing for bankruptcy. Bankruptcy is a type of court proceeding in which a judge examines the assets and liabilities of a person filing for bankruptcy to decide if that person’s debts should be discharged; in other words, waiving that person’s legal obligation to pay their debts.
Medical bills, student loans, mortgage debt, and credit card debt are a few of the common financial strains people find themselves overwhelmed with, unsure of how to pay them off. Filing for bankruptcy can reduce or even eliminate your debt, and is designed to help people in financial distress, not to punish them.
Bankruptcy can have adverse effects on your credit score for 7-10 years, but it is possible to recover by making intentional, responsible financial choices after bankruptcy. Around 700,000 bankruptcies are filed every year, and in most of those cases, the filer is able to recover from their financial difficulties.
If one or more of the following situations is true for you, it might be time to consider filing for bankruptcy:
The general rule of thumb when deciding whether to file for bankruptcy is to assess whether you could feasibly pay off your debts within five years’ time. If the answer is no, filing for bankruptcy may be a feasible way to ease your financial burden and give you a chance to start over.
If you have never filed for bankruptcy, or if it has been eight years since you successfully filed for bankruptcy, you may be eligible to file again. If you filed for bankruptcy in the past but were not successful and did not have any debts discharged as a result, you are still eligible to file again.
You must complete a pre-bankruptcy credit counseling course 6 months prior to filing for bankruptcy. Sometimes these pre-bankruptcy credit counseling courses can actually reveal other methods of debt consolidation or forgiveness that don’t involve bankruptcy.
The means test applies when you find yourself with little to no disposable income. In order to pass the means test, your average monthly income for the six months prior to filing bankruptcy must fall below the median income of a similar household in your state of residence. However, even if you don’t pass this first step of the means test, you may still qualify for bankruptcy if your expenses vastly outweigh your income.
If any of these are true about your situation, it’s a good time to start looking into bankruptcy and what it can do to help your situation. If you have questions about filing bankruptcy, it’s a good idea to contact a bankruptcy attorney and get your questions answered as soon as possible to protect yourself and your family from further financial stress.
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