Even though you may start out with the best intentions when borrowing money and accumulating debt, it is not unheard of for consumers to grow overwhelmed and have to file bankruptcy. Bankruptcy can sound scary, but with a bankruptcy lawyer to guide you, answer questions, and interact with creditors, things can be seamless. Here are a few things you may want to know in the process.
Is there a minimum amount of debt required in order to file bankruptcy?
You can file some types of bankruptcy, no matter how low your debt levels may be. For example, Chapter 7 bankruptcy is not associated with a minimum amount of debt required. Nevertheless, it is best to look at all of your options to handle your debt if you really do not owe a great deal of money. Bankruptcy can only be filed once in so many years, so filing over a small amount of debt that may be better handled with alternative plans can be a better option in some cases. As a side note, there can be maximum debt thresholds with certain types of bankruptcy.
What is the meaning of the debt-to-income ratio, and why does it matter for bankruptcy?
Debt-to-income ratio refers to how much debt you carry in comparison to your current income. The debt-to-income ratio may be brought up for several reasons when you speak with a bankruptcy lawyer. If your income is low and your debt is substantial, it can show that you would have a harder time meeting repayment terms or even finding enough money to pay off debts. For example, if you have $100,000 in credit card debt and only make $50,000 per year, it would obviously be harder to meet minimum repayment requirements.
Is it true you lose everything when you file bankruptcy?
Not necessarily. Unsecured debts are debts that you owe that have not been secured by personal property. Filing bankruptcy on these debts will not lead to you losing whatever you bought with those funds. However, if you file bankruptcy on secured debts or debt secured by collateral, the creditor can have a right to take ownership of whatever properties were placed as collateral. For example, anything you purchased with a credit card (unsecured) is yours, but anything purchased via a more traditional loan from a bank that included collateral (secured) can be taken (such as a car or a house).