Many people enter bankruptcy not knowing what to expect. The process can be stressful enough for some people and failure to prepare can only make matters worse. Part of the process for preparing oneself for bankruptcy is understanding the process and holding realistic expectations.
May Not Qualify
Since important changes were made in 2005, bankruptcy laws have outlined more specific rules regarding qualification standards. Filing for Chapter 7 has become a bit more difficult for some filers. In order to qualify, filers must now pass a means test of income requirements. Filers must (a) have an income less than the median income level of their state or (b) lack sufficient disposable income to repay their debts. While most people will qualify for Chapter 13, there are still some rules as to income levels and the amount required for repayment.
May Lose Assets
As one of the greatest fears among filers, it is important to understand that assets are not guaranteed protection in all cases. Chapter 7 cases put assets at a greater risk for liquidation as debts are being eliminated rather than repaid. However, filers should be aware that bankruptcy exemption laws often protect much of one’s major assets such as a home, car and personal property. Chapter 13 cases are less risky for asset repossession as creditors cannot legally seize the asset as long as payments are being made.
May Not Receive A Discharge
Although the goal for any filer is to obtain a debt discharge, there are situations in which a case may be dismissed instead. Violating certain bankruptcy laws, failing to pay fees or complete required steps of the process can all lead to a case being dismissed. In some situations, the court may allow the debtor to re-file once they have met the necessary requirements. However, if the case was dismissed due to suspicion or convictions of fraud the debtor is unlikely to have their case reinstated and may face serious consequences.