FAQ on Filing Bankruptcy

Filing for bankruptcy is generally an option of last resort for most individuals. It can be a complicated process that allows the court to step in between you and your creditors to help resolve your financial issues. While it can have a negative impact on your credit, it can also stop the harassing calls from your creditors threatening legal action. It is important, however, to arm yourself with as much information about the bankruptcy process as possible before filing so you know what to expect.

How Much Debt Do I Need To Have To File?
Filing bankruptcy is not about the amount of debt you have, but more about your ability to manage it. If you are in a temporary financial rough spot, that is not reason enough to file. If, however, your debt is so overwhelming that instead of making headway to pay it off, you are sinking further in as the weeks go by, then bankruptcy might be your best option. However, keep in mind there are limitations on each bankruptcy option and each state sets its own median income requirement. According to the Expert Law website, in order to file for Chapter 7, you cannot earn an amount that exceeds your state's median income margin and you must be unable to pay at least 25 percent of your "nonpriority unsecured debt." The site states that to file Chapter 13, you must bring home an income that totals higher than your living expenses, which the court must deem "reasonable," and you must be able to pay at least 25 percent of your "nonpriority unsecured debts," which might include unsecured personal or car loans.

Do I Need A Lawyer To File?
Although the paperwork is complicated and extensive, you can file it yourself without incurring the expense of a lawyer. According to the Moran Law website, however, if you are able to hire a lawyer to assist you in navigating the process, it is prudent to do so, particularly if you have property or numerous other assets. The site states that when bankruptcy laws were revised in 2005, they were meant to discourage consumers from frivolously filing, so the paperwork was purposefully made more complex. To avoid any errors, work with a lawyer to ensure you've filled out everything correctly and that nothing you've signed or stated plays to your disadvantage in court.

How Do I Choose The Right Type of Bankruptcy To File?
The two main types of bankruptcy are Chapter 7, where your debts are dismissed, and Chapter 13, where you repay your debts. If you are working on rebuilding your credit, then Chapter 13 is a show of good faith that it is important to you to pay what you owe. Choosing the right one also depends on your personal situation; for example, if you have no income--or access to income in the near future--then you may not have an option; you may have to file Chapter 7.

Can You File For Bankruptcy Repeatedly?
Each time you file for bankruptcy, it is a black mark against your credit and your ability to obtain it. Therefore, if you have any interest at all in rebuilding your financial portfolio and regaining access to credit in the future, it is best to refrain from ever filing again. You can officially file Chapter 7 bankruptcy again eight years after your previous filing of the same bankruptcy type or six years after a Chapter 13. You can file Chapter 13 four years after a Chapter 7 and two years after a Chapter 13.