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Can anyone declare bankruptcy?

Technically speaking, anyone can declare bankruptcy. However, that doesn’t mean anyone is eligible. It is an option for everyone in Wisconsin, but specific eligibility is considered on a case-by-case basis.

For example, for those considering Chapter 7 bankruptcy, a means test may be used. This test simply looks at financial obligations, income and other such factors. In essence, since Chapter 7 means the debt is eliminated after the liquidation of assets, you have to show that you really don’t make enough to pay off that debt.

For those who have too much income, that doesn’t mean there are no other alternatives. For example, in some cases, Chapter 13 bankruptcy is used. Rather than liquidating assets and eliminating debt, it focuses on setting up a repayment plan. You can then use that high income to pay off debt on a schedule that works for you.

Another thing to consider is that only certain types of debt may be eligible. This constricts the use of bankruptcy so that it’s not open to everyone, or at least to every debt.

For instance, perhaps your debt is child support. You haven’t paid in five years. Even though you may be able to use bankruptcy to get rid of credit card debt and other obligations so that you can afford to pay child support, you can’t discharge the child support debt itself. You still have to pay.

Still wondering if bankruptcy is the best option for you? Be sure to carefully consider it from all angles to discover what financial tools you have at your disposal.

Source: State Bar of Wisconsin, “Bankruptcy: Answering Your Legal Questions,” accessed July 13, 2017

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