As readers of this Georgia-based legal blog know, bankruptcy is not a single process. There are many different forms of bankruptcy that are available to individuals and businesses alike. When it comes to personal bankruptcy most people file for either Chapter 7 bankruptcy or Chapter 13 bankruptcy. Each has its own requirements for how to qualify for its individual protections.
For example, the amount of income that a person earns may dictate which form of bankruptcy that they are able to pursue. Generally, individuals of limited means who do not earn significant incomes will only qualify for Chapter 7 bankruptcy. This is because individuals who use Chapter 13 bankruptcy to manage their overwhelming debts must make enough money to pay off their creditors through the execution of their repayment plans.
In fact, if a person earns too much money they will not be eligible for Chapter 7 bankruptcy. Unlike the repayment plan that helps individuals settle their debts through Chapter 13 bankruptcy, liquidation is the method that individuals use in Chapter 7 bankruptcy to pay off the creditors to whom they owe money.
Earning an income is an important component to securing money to repay the lenders who seek repayment of their loans. Without enough income a person may not be able to manage a repayment plan and therefore may have to use Chapter 7 bankruptcy to get out from under their financial burdens. Those whose incomes are sufficient enough can create plans to repay their creditors over time all while maintaining their assets and incomes while avoiding the Chapter 7 liquidation requirement.