Filing a bankruptcy petition is a very serious financial decision that should never be taken lightly. Understanding how bankruptcy actually works is very important, and in Nevada, all individuals are required to complete a credit counseling program approved by the state of Nevada within the 180 days prior to the actual filing. This means that potential bankruptcy filers should be prepared to enter bankruptcy in short order following course completion, and consulting with a Nevada bankruptcy attorney or debt relief counselor beforehand is a good decision. If there is a method of avoiding bankruptcy, that path should at least be evaluated before actual enrollment in the required credit counseling program. In addition, all successful bankruptcy petitioners will also be required to complete an approved debt education course at the end of bankruptcy before the liabilities can be discharged.
Should I file Chapter 7 or Chapter 13 Bankruptcy?
There are some specific rules that apply when an individual is seeking bankruptcy protection, with the primary question usually being eligibility for a Chapter 13 filing. Chapter 7 bankruptcy is a discharge of unsecured debt and assets can be sold by the bankruptcy trustee to generate funds for repaying creditors. Chapter 13 filers have extra asset protection for a home and a vehicle, but this chapter is a debt restructuring plan that usually includes a three-year or five-year repayment program to protect those assets. Eligibility is determined by a “means test” evaluating income level and disposable income. Those who fall below the state median income are eligible for Chapter 7. All others must file Chapter 13, which means the repayment program must be feasible with respect to the personal household budget. And remember, while there are federal bankruptcy exemption laws that some states allow, Nevada requires all bankruptcy petitioners to use Nevada exemption standards.
Impact on Credit Rating
Both Chapter 7 and Chapter 13 bankruptcies can be effective in discharging debt with minimal financial asset loss, but another purpose for filing is limiting negative impact on the filer’s credit rating. Maintaining an acceptable credit rating is important in the current economy, and the structure of your bankruptcy petition can sometimes help in this regard. Actually, there are time limit restrictions on how often an individual can file, and many times a petitioner will be offered more credit immediately from some financial agencies. In addition, certain assets can also be protected by a consolidation agreement with certain creditors, especially in a Chapter 13 filing that is designed to protect the maximum allowance in assets.
Filing bankruptcy is a step that many individuals consider as a last resort, and often the disposition of the creditor can force that decision. Regardless of the situation, it is always a good initial action to look at potential debt relief options with a debt relief specialist before filing. This helps ensure the decision to file is the right step for the right individual financial situation. Just make sure that your legal counsel is a registered and approved agency in the state of Nevada because of the restrictions on using federal statutes.