PERSONAL DEBT
MARGUERITE OFFERS TWO SOLUTIONS
SETTLE YOUR PERSONAL DEBT OUTSIDE OF BANKRUPTCY FOR LESS THAN YOU OWE
Settling for less than you owe involves disputing the debts on your credit report. Any debts that cannot be removed with disputes will be offered a settlement based on what you can afford to pay.
BANKRUPTCY AS A SOLUTION
Chapter 7 and Chapter 13 Bankruptcy are the most common types:
CHAPTER 7 BANKRUPTCY is often called straight bankruptcy or liquidation. Exemptions usually allow you to keep most or all of your property.
The purpose of filing a chapter 7 is to obtain discharge of your debts. Certain debts may not be discharged such as child support, alimony, certain fines and penalties.
Secured debts can be legally reaffirmed. That means you agree to pay the debt after bankruptcy.
CHAPTER 13 BANKRUPTCY is a repayment plan filed in the court. You make a monthly payment to the chapter 13 trustee for three to five years and it distributed to creditors. Chapter 13 allows only certain budget items and this may differ from court to court. The income you have left after allowed items is what you repay.
DO YOU QUALIFY TO FILE A CHAPTER 7 BANKRUPTCY ?
If you are an individual, the first step is to determine what type of debts you owe.
Add up all your outstanding debts including mortgages, car balances and other secured debts.
Determine how much of your debt is “consumer debt,” debt incurred for family and household purposes.
Determine how much of your debt is business related, taxes, tort claims (court actions).
Note: Sometimes a credit card is used for personal and business use so the charges must be analyzed and divided accordingly. Also, any debt incurred for a business purpose will not be consumer. This can be a tricky thing to determine in some cases and will require help from a bankruptcy expert.
Once you have the totals, if 51% of your debt is consumer, you must now start with the Means Test to determine if you can file a Chapter 7 or if you would be required to file a Chapter 13.
If 51% of your total debt is taxes, business debts or tort claims, then you are exempt from the Means test and all the strict requirements of a consumer debtor under the new law.
THE MEANS TEST AND WHAT IT MEANS TO YOU
The Means Test is the beginning point to determine if an individual qualifies to receive a Chapter 7 discharge. This uses Census Bureau figures on each state’s median income as a starting point for qualification.
In Texas, the current median income is $33,341 for a family of one, $47,321 for two, $50,651 for three and $57,511 for a family of four. To determine your income, you take your gross income from any source for all family members for the last six months and double it to get the annual figure.
If you have received a bonus or any lump sum, this can really make the calculation higher than your actual income.
This figure is just the beginning of the calculation. Then allowed and actual expenses are factored in. You may be allowed to deduct the actual cost of your house payment, car payments, utilities, health care, child care and other items. You may also factor in payments you are making for child support or taxes and other secured debts.