It is not that uncommon to find yourself in a position where you can barely afford repay your debts due to some circumstances that constitute to a financial crisis. When such a situation comes your way, filing for bankruptcy can be one of your most viable solutions for a way out. But the major question here is – who can file bankruptcy? This article provides a brief description of situations where you are considered eligible for bankruptcy filing and the options that would best suit your specific situation.
Types of Bankruptcy
Before determining whether or not you are eligible for a bankruptcy filing, it is important to familiarize yourself with the various types available in most of the US states. The three most commons include chapter 7, 11, and 13. Chapter 7 bankruptcy can be a good option for individuals or businesses with certain financial obligations or debts that have proved difficult to meet or offset. Individuals may receive a complete discharge of their debts if the court finds the eligible for this option. However, businesses can use this option for liquidating their assets and shutting their operations down, but may not benefit from a complete discharge of their debts under chapter 7. A Chapter 11 bankruptcy can be ideal for corporations looking to reduce pressure from creditors, and to protect their possessions from foreclosure. On the other hand, chapter 13 bankruptcy can be ideal for individual owners of property who are looking for a revision of their debt repayment schedule.
Who Is Eligible?
Anyone can be eligible to file for bankruptcy in general–even some of the best bankruptcy attorneys. However, this does not necessarily mean that everyone is eligible for any type of bankruptcy as per the chapters earlier described. Eligibility is also based on whether you are a corporate body or an individual, the amount of debt you owe, and among other factors, whether or not you have filed for bankruptcy before.
According to the law in most states, you may not be eligible to file for particular kind of bankruptcy for a number of years if you’ve done so before. After filing for bankruptcy under chapter 7, for instance, it takes 8 years before becoming eligible to file under the same chapter again.
An Honest Debtor
Bankruptcy is considered a form of financial relief for the honest debtor. It would be against the law for one to accumulate large debts that can’t finance, with the aim of filing for bankruptcy later. This would be considered defrauding the creditors.
Debtor with Loss of Income
Losing employment while owing a large amount of debt or mortgage loans can prompt for filing bankruptcy. As a matter of fact, this is one of the most common reasons people go for this form of financial relief. To eliminate such kind of debts after a loss of income, chapter 7 bankruptcy can be ideal. In order to avoid the loss of property on which the homeowner has equity, a chapter 13 bankruptcy can be the best option, but then they’d have to keep current with their mortgage repayment through negotiating a better payment schedule.
Wealthy Debtors with Huge Debts
Chapter 7 and 13 bankruptcies are guided by income limits. In this case, wealthy petitioners with huge debt amounts may not qualify for filing bankruptcy under those chapters. A chapter 11 bankruptcy can be the best options for such an individual.