Protecting Your Rights And Your Future

Bankruptcy may allow consumers to eliminate crippling debt

| Dec 8, 2015 | Personal Bankruptcy

When residents of Arkansas look into the question of filing for bankruptcy debt relief, they will generally learn that there are two basic types of filings for consumers with consumer debt. These are Chapter 7 and Chapter 13. Most consumers generally file a Chapter 7 bankruptcy, which is a powerful and even miraculous relief for certain overburdened consumers.

Chapter 7 is powerful because it eliminates unsecured debt quickly and painlessly, without having to struggle making payments to catch up or to meet a negotiated settlement amount. Any eligible debt that is not collateralized by a house, car or other property is unsecured and is dischargeable without further ado in a Chapter 7. Under the current incarnation of the federal bankruptcy laws, however, there is a minimal threshold requirement that consumers must meet to qualify for Chapter 7.

This is called the “means test,” and it boils down to determining whether the individual or married couple make more income than is allowed under the means test limit. An average median income is calculated and specified in each bankruptcy jurisdiction based on state income averages. If the applicants exceed that income limit, and if their special deductions do not step in to save the day, they will have failed the means test and will be prevented from filing.

In reality, however, many struggling consumers who are contemplating debt relief are not in the higher pay brackets that would preclude relief. Furthermore, it is often stated that a Chapter 7 liquidation results in the loss of property or money. In reality, that is not statistically true.

Most average consumers filing a Chapter 7 will receive the benefits of the exemptions provided by law and will not lose any money or property. In Arkansas, consumer filers may choose the federal exemptions, which protect most consumers quite adequately. Of course, each case is determined on its own specific facts, and that is why it is highly beneficial to get a consultation from an experienced consumer bankruptcy attorney so that the decision may be made based on an accurate evaluation of the legal options involved.

Source:, “What Is Chapter 7 Bankruptcy?”, Dec. 4, 2015