When you’re in a tough financial position, barely able to make ends meet, and feeling crushed under the weight of credit card debt, there are ways to find relief. One of those ways is through filing for Chapter 7, or “consumer” bankruptcy. While many people are afraid to explore this option, because of some of the stigma and misinformation around bankruptcy, it can be a smart move for some. The ability to discharge debts and get a fresh start is worth the potential downsides in many situations.
However, even if you are interested in filing for Chapter 7 bankruptcy in Melbourne, you may not automatically be eligible. Chapter 7 is the easiest and simplest type of bankruptcy, making up nearly ⅔ of all bankruptcy filings. It is known as the “liquidation” bankruptcy, because the goal of Chapter 7 is to wipe out debts, often while preserving modest assets like vehicles and personal items. Because it can provide such relief, in a relatively short amount of time, many people lean towards this option.
The first step in determining your eligibility to file for Chapter 7 is to take what is called the “means test.” This is a simple, online calculator (or done with your bankruptcy attorney) that looks at your income, expenses, and both secured and unsecured debts. Your standard of living is then compared to others in your geographical region, often under state guidelines. Most of the time, you can get an immediate answer whether or not you pass the means test. If you do, you can proceed to filing, with a qualified Melbourne bankruptcy attorney. If you don’t pass, there may still be options for you, with other types of bankruptcy, or with debt settlement services.
One thing that some people fail to understand about Chapter 7 bankruptcy is that not all debts can be erased through this method. If you don’t have much credit card debt or other dischargeable debt, but most of your debts come from student loans or alimony payments, Chapter 7 may not be helpful for you. You will still be responsible for student loans, taxes, child support, spousal support, and other similar expenses. Your attorney will be able to explain this to you, and help you calculate how much of your debt is dischargeable.
If you want to learn more about Chapter 7 bankruptcy, the bankruptcy means test, or how to determine your eligibility, reach out to us at Harnage Law. Ask for your free consultation to get started.