No one plans to take on so much debt that they have no way of repaying it all. Unfortunately, circumstances such as job loss, medical expenses, business failure, divorce, or the death of a spouse can put anyone in a difficult financial position. The law recognizes this and gives consumers the option of filing bankruptcy to eliminate or reorganize debts. However, bankruptcy reform laws passed in 2005 require people to meet more stringent criteria before they can receive a discharge of their bankruptcy.

Bankruptcy Filers Must Meet Specific Income Requirements

Each state sets its own income guidelines for bankruptcy. In Georgia, a single filer cannot earn an income greater than $40,631. A married couple with no children filing bankruptcy cannot earn more than $52,610 while a family of four is limited to an income of $68,085. If you earn higher than that amount and still need legal protection while you repay your debts, you may be eligible to file for Chapter 13 bankruptcy.

The Difference Between Chapter 7 and Chapter 13 Bankruptcy

A Chapter 7 bankruptcy can eliminate most debt including credit cards, medical, mortgage, and installment loans. Some debts that are not dischargeable in bankruptcy include delinquent taxes, child support, and student loans. The discharged bankruptcy status will remain on your credit report for a period of 10 years and will affect your credit score. However, there are safe ways to rebuild your credit if you are interested in doing that. Obtaining a prepaid credit card is one example.

Chapter 13 bankruptcy is for people who do not wish to entirely eliminate their debts or whose income is too high to qualify for Chapter 7. When filing bankruptcy under Chapter 13, you and your attorney create a repayment plan that must receive approval from a bankruptcy judge. Your creditors have the opportunity to provide feedback during a hearing. Once approved, a bankruptcy judge receives your payment each month and distributes it to your creditors.

Proving Your Income with a Means Test

You must submit to a means test when filing bankruptcy to prove that your incomes qualifies you for it. This means that you must gather information about each income source, the debts you wish to include in your bankruptcy filing, and the amount of money you must have available each month to meet your living expenses. Each state allows certain exemptions for wages, homestead, automobiles, and personal property that you can deduct from your reportable income.

Bankruptcy Counseling Requirements

Another change passed with the 2005 bankruptcy legislation is the requirement for those filing bankruptcy to complete mandatory financial counseling. You must complete one session before filing bankruptcy to determine if this is the best solution for you and another after filing to establish a budget that will hopefully prevent you from having to file bankruptcy again in the future. Federal law requires an eight-year wait between Chapter 7 bankruptcy filings. Your financial counselor must be listed with the United States Department of the Treasury.

Schedule a Bankruptcy Consultation

Filing bankruptcy is a huge decision with repercussions that last several years. We invite you to contact CMC Law to learn more about the process and whether you qualify for this legal elimination or restructuring of debts.