The decision to file for either Chapter 7 or Chapter 13 is a big one. This decision is one that requires substantial consideration and expertise. One of the most significant aspects of my work as a Sacramento Bankruptcy Attorney is to advise Sacramento area residents as to whether bankruptcy is a viable decision for him/her to begin with. Many individuals who schedule a consultation with my office are anxious to avoid filing Chapter 7 or Chapter 13 and come to my office in an attempt to explore the options available to them. In some cases, potential clients have specific matters that need to be addressed under their economic circumstances.
The first thing a person considering bankruptcy needs to take into account is the amount of debt the person has looming over his/her shoulders. Chapter 7 or Chapter 13 is really not a wise step to take if your debt to income ratio or debt to assets ratio are relatively low. The Bankruptcy code was revised in 2005, making it more difficult for a person to qualify for Chapter 7 in the first place. Thus, this question of whether bankruptcy can provide a solution to the debtor is often resolved by a simple mathematical equation. If an individual qualifies for Bankruptcy under the revised code, then there is a high probability that the individual has a high debt to income ratio which can be resolved by filing.
A simple way to calculate this ratio is for a person to examine his/her monthly expenses for all your necessary monthly obligations. This means the debtor needs to compile his/her monthly payments for things such as housing, vehicle, and living expenses. Do not include payments for credit cards or other nonessential expenses. Next, the debtor must compare that number with his monthly income. As a general rule, if the debtor cannot pay off his outstanding debts with the balance of his income that exceeds the necessary monthly expenses, over a three year period, bankruptcy may be a good option.
Sacramento residents considering bankruptcy must also remember that Chapter 7 or Chapter 13 is not a solution for every type of debt. Certain debts are not dischargeable under the bankruptcy code. For example, a debt incurred through fraud, debts for child or spousal support, taxes, criminal fines or penalties, and most student loans cannot be erased. If a person is saddled with these types of debts then bankruptcy may help to the extent that any unsecured debt becomes eliminated and permits the debtor to use his income to pay those outstanding obligations instead of the other debt.
The decision to file bankruptcy is not only complicated but requires some degree of strategic planning. This is why a person should always seek legal counsel when making the decision to file Chapter 7 or Chapter 13. As a Sacramento Bankruptcy Attorney I am prepared to offer legal options beyond traditional bankruptcy to individual’s struggling with burdensome debt or in otherwise financial distress. Whether a person wants to negotiate a debt settlement plan or defend against a foreclosure action I always recommend taking the time to schedule a consultation to explore the best available options.