Many people that are considering filing bankruptcy typically look at every alternative in an effort to avoid the process. There is so much bad press out there on the damage it does to one's credit that most people do everything they can to avoid a bankruptcy filing at all costs. Typically, when an individual contacts a bankruptcy lawyer and has a consultation they will do a brief evaluation of one's finances to see if that person would even qualify to file Chapter 7 bankruptcy. After the changes the bankruptcy code back in 2005, an individual filing Chapter 7 is required to pass a means test to qualify. Basically, the means test takes a six month look back timeframe from the month prior to the bankruptcy filing. The bankruptcy lawyer will then divide it by six and multiply by 12 giving them the average annual income for that individual. The bankruptcy lawyer will compare the household income against the median income chart for the state in which the person resides. If the person makes less than the median income for that state, they would most likely qualify to file Chapter 7 bankruptcy. There is much more to the formula and is one of the reasons it's important to be represented by an attorney for the process.
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Most bankruptcy attorneys will always look for alternatives to filing bankruptcy when an individual first contacts them. They are in the business to help someone and not to collect fees for someone that doesn't need to file for bankruptcy. After a quick evaluation, a bankruptcy lawyer should be able to see if a person could just do some budgeting that would allow them to be able to pay the debt off and avoid filing bankruptcy. The bankruptcy lawyer will usually add up the total amount of unsecured debt and ask the debtor to budget their household income to see how long the debt would take to pay off if they stop charging at that time. If it takes longer than five years, the person might be a candidate for filing Chapter 7 bankruptcy. They want people to seriously look at not living beyond their means and to cut the ties with the credit cards. If they file for bankruptcy, they will be forced to live without credit cards for probably at least a year. If the debt is small enough, why not avoid filing bankruptcy and buckle down and pay these guys off.
In today's culture most Americans have way more debt than they can pay off in five years. In fact, many of them protect their credit rating so they can get new credit cards to pay off the old ones. Some people use the excuse that they're doing it to lower their interest rate. In reality, they are just going deeper in debt and soon will hit the point of no return.
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