Can Anyone File For Bankruptcy?
This is actually a trick question. Can anyone file for bankruptcy? Now legally, yes, any American citizen can apply for bankruptcy relief. In practice, whilst you can apply, there is no guarantee you will make it past the first phase. In fact, those going through the filing process without legal assistance rarely make it through to a satisfactory conclusion.
Bankruptcy as a legal right has been modified over the years to bring protection to those in serious need and to creditors who have a right to what is owed to them. Bankruptcy then is designed to do the best possible justice to both parties.
If the debtor is in a situation where repayments are impossible, a Chapter 7 petition is generally their best approach – so long as they pass the means test. Most people who are in this situation will pass this means test.
On the other hand, if the debtor has some income, and the debt can be serviced by reducing payments then a Chapter 13 debt reorganization petition is the best approach.
The Chapter 7 approach will see a debtor stripped of their non-exempt assets, which are sold off to repay some of the debts. After that, the debt is written off totally. In these cases, the debtor loses (their assets) and the creditor loses (the balance of what is owing).
In a Chapter 13 filing, the debts are repayed over time. The debtor gets to keep their assets and the creditor receives their rightful payments, albeit a little slower than planned.
Yes, anyone can file for bankruptcy. However, not everyone meets the criteria and will find their applications to the courts rejected. Filing for bankruptcy is now a complex process so hiring a competent bankruptcy specialist is the only to ensure your passage through the bankruptcy court is as smooth as possible.
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