When is one considered “insolvent”?
In today’s economic conditions, many people have lost their jobs, homes, and health coverage. Even the most diligent bill payers can find themselves in financial jeopardy. When you are unable to pay your debts as they come due, you are considered “insolvent”. Creditors may begin proceedings to foreclose or repossess property or seek to garnish your wages. Filing a bankruptcy case can help you get a fresh financial start, stopping bill collectors, and getting you back on a more secure financial path.
If you are considering filing for bankruptcy protection, you should learn about your options. For most people, personal bankruptcies are filed under either Chapter 7 (liquidation) or Chapter 13 (payment plan). A Chapter 7 is the most common type of bankruptcy chapter for personal debts. In a Chapter 7 case, a trustee is appointed to liquidate your non-exempt assets to pay your creditors. If you receive a Chapter 7 discharge, you will get rid of most unsecured consumer debts. If you have secured debt (a debt secured by a lien on your personal or real property), such debts may “pass through” your Chapter 7 case, and secured creditors may still seek to repossess or foreclose on those debts after your bankruptcy. You must also financially qualify to receive a chapter 7 discharge. Bankruptcy courts use a “means test.” The Chapter 7 means test is a complex formula based on your pre-bankruptcy assets, income, which is applied to determine whether or not you have enough money or non exempt assets available to make some payment to your creditors.