Glasgow may be a city in Kentucky that is recognized for being the birthplace of multiple notable people ranging from major league baseball players to governors, its appreciate of Scottish culture, and its gorgeous historic homes, but it is also a city where more than 19 percent of individuals live below the poverty line. Indeed, financial woes are very real to many Glasgow residents, and some find themselves struggling under mountains of debt, wondering whether there will ever be an escape.
A skilled Kentucky can help you find a solution to your financial woes. Reach out to an attorney today for a consultation to discuss your situation.
What Is Bankruptcy?
Bankruptcy is a legal process that involves an individual appearing before a bankruptcy court, presenting evidence of debts, assets, and income, and asking the court to discharge those debts. Bankruptcy is one way for an individual who cannot pay their debts to acquire a degree of financial relief, but it is important to remember that there are different types of bankruptcies, not all debts are dischargeable, and that filing for bankruptcy often means losing property and taking a significant hit to one’s credit score.
Chapter 7 and Chapter 13 Bankruptcy
There are two primary types of bankruptcies that are available to individual consumers: Chapter 7 and Chapter 13 bankruptcy.
Chapter 7 bankruptcy. Chapter 7 bankruptcy is only available to those individuals with few assets and little income; if you make too much money, you will not be eligible for Chapter 7 bankruptcy. Chapter 7 bankruptcy is designed to give you a fresh start by liquidating your assets, using these assets to pay creditors, and wiping out remaining debts (with the exception of certain debts that cannot be discharged).
Chapter 13 bankruptcy. Chapter 13 bankruptcy is designed for those debtors who have some income and are able to form a repayment plan in which they pay back a portion of their debts over a three-to-five year time period. Chapter 13 is often more advantageous for those who do have some income as it allows for the debtor to keep more assets in exchange for repayment.
The type of bankruptcy you will file will depend on numerous factors, including the means test.
Bankruptcy Means Test
Even if you want to file for Chapter 7 bankruptcy, you will be barred from doing so if you do not pass the means test. The means test is used to determine whether or not you have the income and assets to pay back a portion of your debts, rather than having all of your debts forgiven. You do not have to take the means test if you are a disabled veteran and your debt was incurred while on active duty, or if your debts are not primarily consumer debts.
The means test looks at your income or means. If your monthly income is less than the median household income for a household of your size in Kentucky, then you will likely pass the means test and be eligible for Chapter 7 bankruptcy. There are some cases in which you may be able to qualify for Chapter 7 even if you make above the median income; discuss your case with a bankruptcy attorney to learn more.
Advantages of Filing for Bankruptcy
Filing for bankruptcy has advantages and disadvantages. Two of the biggest disadvantages have already been listed: losing your property and suffering a negative hit to your credit score, which can of course prevent you from being able to get a loan, take out a line of credit, or even secure housing in the future.
While the disadvantages of bankruptcy should certainly be taken seriously, there are also a number of advantages, making filing for bankruptcy the best choice for individuals who do not have other debt relief alternatives available to them. These include:
- Initiate the automatic stay. One of the most beneficial parts of filing for bankruptcy is that the moment that you file, the automatic stay will be initiated. The automatic stay places a mandatory hold on creditors’ ability to collect debt. This can give you some much-needed breathing room, and can provide relief when action against you was imminent, such as a foreclosure, lawsuit, etc.
- Discharge debt. Of course, the other reason that many people choose to file for bankruptcy is because they simply have too much debt and too little income to ever be able to pay down their debt and discharging debt and starting over is a must. While not all debts can be discharged in a bankruptcy proceeding, being released from liability for many debt types, including credit card debt, can provide a huge sense of freedom.
- Keeping your property. Another major advantage to filing for bankruptcy, specifically Chapter 13 bankruptcy, is that doing so may allow you to keep property such as a house, car, and other personal assets. Indeed, in exchange for allowing you to keep your property, you pay off a portion of your debts overtime with a repayment plan. While repayment can be difficult, this can also be a very empowering experience.
Learn More About Bankruptcy Today
Bankruptcy is not something that you should rush into, and it’s not the right choice for all people in Glasgow who have debt, even if that amount of debt is oppressive. Before you make the decision to file for bankruptcy, we strongly encourage you to schedule an appointment with a local bankruptcy attorney today.