Making the decision to file for bankruptcy may not be easy, but for some people in Nashua filing for bankruptcy is the best way for them to address their overwhelming debts. Some people may want to choose Chapter 7 bankruptcy, in which a person's assets are liquidated and the proceeds are used to pay the person's creditors. After the process is complete, many of the person's debts will be extinguished.
However, it is important to remember that not everyone qualifies for Chapter 7 bankruptcy. In 2005 Congress enacted the Bankruptcy Abuse Prevention and Consumer Protection Act. The act included what is now known as the means test. The means test is used to determine if the debtor has the funds available at the end of each month to pay down at least some of their unsecured debts. If so, then the debtor will generally have to file for Chapter 13 bankruptcy, which establishes a three to five-year repayment plan for paying back debts, rather than liquidating assets to pay for them.
However, even if a debtor does not qualify for Chapter 7 bankruptcy under the means test, it doesn't mean filing for Chapter 7 bankruptcy is impossible. The bankruptcy court has the ability to determine if a debtor can file for Chapter 7, even if the debtor does not pass the means test. However, the debtor must show that special circumstances exist that make Chapter 7 a better option than Chapter 13. This is to prove that the debtor is not trying to abuse the bankruptcy system.
In the end, whether a debtor files for Chapter 7 or Chapter 13, filing for bankruptcy can be a way for them to have many of their debts discharged. This leaves them free to move forward on fresh financial footing. Of course, the information in this post should not serve as the basis for any bankruptcy filing. Those who want to learn more about qualifying for Chapter 7 bankruptcy will want to seek the professional guidance they need to make informed decisions.