The United States government offers several ways for struggling individuals and business owners to get out of debt. The type of debt relief program someone is eligible for depends upon the nature of the debts as well as his annual income level and ownership of assets such as a home.
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Tax Assistance
Most types of federal, state and local income tax bills are ineligible for bankruptcy debt relief programs, warns the Internal Revenue Service. Unless the tax bills were incurred at least three years ago, you must work out payment arrangements with the involved taxation agency. Failure to pay taxes can lead to liens against your property and wage garnishments. As of 2011, people owing less than $25,000 in federal taxes could apply online for an installment payment plan.
Chapter 7 Bankruptcy
People with few assets to lose and earning less than their state's annual median income level can potentially discharge many of their debts through Chapter 7 bankruptcy. As of 2011, the annual median income figure for a single Florida resident was $40,029, while the yearly income level for a family of four in Rhode Island was $88,593, according to the U.S. Trustee Program. State asset exemption laws may enable some Chapter 7 filers to keep their homes and at least some of their cash.
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Chapter 13 Bankruptcy
If you earn more than your state's annual median income level and did not successfully prove your inability to repay debts and support your family, you must file Chapter 13 bankruptcy. Chapter 13 creates a partial debt repayment plan that typically lasts between three and five years. You cannot include child support, alimony, court fines or most federal student loans, warns the book "How to File for Chapter 7 Bankruptcy." Also, you must have consistent income to qualify for Chapter 13 and cannot get new credit without a judge's approval during your repayment plan.
Corporate Bankruptcy
Corporation owners and self-employed people can request a Chapter 11 debt repayment plan, notes the U.S. Securities and Exchange Commission. Chapter 11 allows people to keep business and personal assets while partially repaying all corporate and personal debts. Business owners who wish to cease operations can apply for corporate Chapter 7. This type of bankruptcy liquidates all corporate assets, distributes the proceeds to creditors and absolves the business owners of all corporate debts.
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