You may have heard time and time again that filing bankruptcy is the worst thing you can do when faced with financial hardship. While bankruptcy can eliminate a significant amount of your debt, it can’t wipe the slate clean if you have certain types of debt, including child support, alimony, student loan debt, taxes owed to the government and others. But the truth is there are some circumstances when filing Chapter 7 bankruptcy is the best option.
- Low Credit Score. If your credit score is already below 600, you probably are not able to get credit in most situations anyway, so filing Chapter 7 bankruptcy won’t make much of a difference.
- You Have More Than $10,000 in Dischargeable Debt. Dischargeable debt is the type that can be erased and includes credit card debt, medical bills, car loans, personal or payday loans, utility bills and judgments from credit cards and debt collection agencies. If you have accumulated more than $10,000 of debt and have no way to repay this large sum, Chapter 7 bankruptcy can often allow you to eliminate most of this type of debt.
- You Don’t Own Expensive Property. If you don’t have much to lose, but still cannot make all of your payments, filing bankruptcy can allow you to make a fresh start.
- You Earn Less Than the Median Income Amount for Your State. If you don’t have a job or earn close to minimum wage and are able to pass a test called the “means” test, which takes into account your average monthly income over the last 6 months, you are likely eligible to file.
- Fear of Being Sued for Debt or Having Wages Garnished. Once you file for Chapter 7 bankruptcy, a rule called the “automatic stay” goes into effect, which temporarily stops anyone from collecting debts you owe them.
If you think Chapter 7 bankruptcy could be the best option for your situation, please give us a call at Bennett Guthrie PLLC today.