When Does One File for Bankruptcy?
As a legal procedure that is highly useful for getting organisations or individuals out of debt, it can offer a convenient solution.
But the trick is that not everyone qualifies. A means test may need to be passed prior. Consumers must look at other options of debt restructuring before opting for this.
It’s important to note that it can be voluntary or requested by lenders when they ask the court to order a person bankrupt.
In the case of a voluntary bankruptcy filing, when does one file?
- When there are too many bills to keep up with
- If you’re being sued by debt collectors
- When you’re in need of some legal protection. The court issues automatic stay, which provides protection.
- When your bank account is frozen
- When your wages are being garnished
- If in danger of losing your home
This is meant to be a last resort, once you have tried other solutions first.
With a low income and a low number of assets to your name, filing for Chapter 7 bankruptcy could just be what you need. You should only opt for this once clear about your assets and when you know that selling these is sufficient to cover payment of your creditors.
If you have a higher income, however, and you would prefer to keep your assets, then a different type may be best suited to you.
This is a decision that should only be made once you know your level of income as well as the assets you have to your name. This will determine the type of bankruptcy for which you can file.
Either way, you should make the decision only when you are fully aware of all implications that come with.