Bankruptcy has long held negative connotations in the minds of many indebted consumers - meekly standing by while the government demands, "Hand over the keys to your house!" and your bank accounts are drained of everything you've ever worked to obtain.

Fortunately, these frightening myths are just that – fictitious tales sparked by angry credit agencies and overworked bankers. The reality is, sometimes filing for bankruptcy can be one of the best ways to improve your financial future. But before you can file, it is important to determine if you're eligible.

Bankruptcy Eligibility for Today's Consumers

Bankruptcy has long been divided into two major categories – Chapter 7 and Chapter 13. Chapter 7 requires individuals to pass a strict eligibility test, while Chapter 13 is more relaxed, so to speak, when it comes to eligibility.

In order to be eligible to file for Chapter 7 bankruptcy, you must pass a means test, which determines if you are truly unable to pay back your debt. Simply compare your income to the median income of households in your area. If you earn less than the median, you are eligible to file.

If your income exceeds this limit, you will need to examine your disposable income. After paying your monthly expenses and a portion of your debt, does your leftover income surpass the allotted amount? If so, you are considered ineligible for Chapter 7 bankruptcy and will have to file for Chapter 13.

Chapter 13 does not enforce any real eligibility requirements and may be more beneficial for certain individuals. It can be difficult to evaluate your debt and finances, which is why a Modesto bankruptcy attorney from our firm can assist you in this process. Bankruptcy is nothing to be ashamed of! We are eager to help you achieve financial freedom – call us today.