What is the use of declaring bankruptcy?
Bankruptcy is a legal process in which a debtor can be exonerated from all or some of his debts. Therefore, bankruptcy can be a very useful tool for those who have debts and whose financial situation prevents them from paying them.
Bankruptcy law is set forth in Title 11 of the United States Code. There are several chapters within this Title that offer tools to relieve debtors.
One of the first benefits that someone seeking bankruptcy obtains is the so-called automatic stay or bankruptcy stay. This benefit is automatically accessed when you file for bankruptcy. The benefit is that, with certain exceptions, creditors must immediately stop any action aimed at collecting money from the bankruptcy petitioner. In other words, if you are sheltered by the bankruptcy stay, they will not be able to call you to collect and they will not be able to seize your property or expropriate it as part of the collection process, for example.
The automatic stay benefit applies to all types of bankruptcy under Title 11. However, when it comes to bankruptcy for individuals, there are two Chapters of special importance in Title 11: Chapter 7 and Chapter 13. In this text, we will examine some of the requirements for filing for Chapter 7 bankruptcy.
A person who files for Chapter 7 bankruptcy can access the benefit of having all their debts forgiven in a period that is normally three or four months. However, there are certain debts that are not covered by Chapter 7: student loans, child support obligations, some taxes, and fines acquired for criminal acts. Typical debts that are totally or partially forgiven by bankruptcy are those of credit cards, personal loans, and debts for medical services, for instance.
To qualify for Chapter 7 bankruptcy, you must show that your family income is below a certain level. Family income refers to the amount of money that family members earn together. At this point, it is important to clarify that the concept of “family” must be carefully examined since it not only refers to ties of consanguinity or marital status. For example, if two people live together, they may be considered as one family, even if they are not married and do not pay taxes together.
Read more: Can Filing Bankruptcy Save Your House?
In the state of Washington, in order to be able to apply for bankruptcy, the income of the family has to be lower than the following amounts depending on the number of the household members, as follows:
- 1 member household: $67,511.00 /year income.
- 2 member household: $80,251.00 /year income.
- 3 member household: $92,528.00 /year income.
- 4 member household: $107,481.00 /year income.
And for more than 4 family members, you must add $9,000 for each additional individual.
In addition to showing a certain income, there are other requirements that apply. One of them is that you must not have filed for bankruptcy in the past 7 years.
If you are not sure if you qualify, we recommend that you consult a bankruptcy attorney. At Quiroga Law Office we have extensive experience in this area, and we can assist you.