Submitted by Rachel R on Wed, 06/13/2018 - 8:43am
How to choose the best bankruptcy path
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Debt is a necessary evil in life. It lets you buy a home, car, and live a better life than you could if you had to pay cash for everything. But when debt spirals out of control, and you can’t pay what you owe, it can turn into a nightmare. One option to consider for unmanageable debt is Wilmington bankruptcy, but there are two types to choose from – Chapter 13 and Chapter 7. Today we look at why Chapter 7 could be the better option for your debt dilemma.
Filing Chapter 7 bankruptcy offers the quickest debt relief you can get short of winning the lottery and instantly paying off all your bills and debt. The entire Chapter 7 process, from initial consultation and filing to discharge of debt, often takes just three to four months. Imagine going from the stress of dodging debt collectors to breathing easy and a fresh financial start in just one-fourth of a year.
By comparison, Chapter 13 bankruptcy is a repayment plan that takes anywhere from three to five years. For some, Chapter 13 works better but if you qualify for Chapter 7 and it’s a fit, it’s fast and helpful.
Any debt that is not tied to an asset is an unsecured debt. It means if you default on payments, there’s no specific asset the creditor can come take back. An auto loan and mortgage are secured debts since they’re tethered to your car or house. If you default, they foreclose or repossess. Unsecured debt includes medical bills, credit cards, personal loans, some older income taxes, etc. Student loans are also unsecured but are a special case.
For qualified unsecured debt, it can all be wiped out 100% by Chapter 7 so you have a fresh financial start. If that makes up the bulk of your debt, you can essentially walk out of Wilmington bankruptcy with a clean slate and restart your life!
Dealing with unmanageable debt is a terrible fate. Living paycheck-to-paycheck is stressful and can rob you of quality of life. Money woes can wreck your relationships, cause you to make mistakes at work, and foul up almost every aspect of your existence. With Chapter 7 bankruptcy, from the moment your petition is filed, debt collectors must stop contacting you. That represents instant peace of mind. No more dodging phone calls and tensing up when the phone rings!
Chapter 7 is meaningful as it frees you up to start living your life. You may come out of bankruptcy with some debt (newer income taxes or your mortgage and auto loan so long as they’re in good standing), but without so much unsecured debt, you can get your finances in order.
An oft-repeated myth is that the bankruptcy Trustee sells all your personal assets in Chapter 7 bankruptcy. That’s not true. North Carolina law provides reasonable exemptions to protect most (if not all) your assets. With individual Wilmington bankruptcy, you can shield $35k in home equity and $70k if you file with your spouse. You can protect almost $4k in car equity (car value – car loan = equity), household furnishings, clothing, etc.
If you’re sitting on a trove of valuable antiques, fancy jewelry, fur coats, and sports cars that you own free and clear, you might have a different experience. But most people get to keep all their stuff while still shedding lots of debt.
When a creditor writes off the debt you owe because they’ve given up on it, you may get a nasty surprise in the mail in the form of a 1099-C tax form. That occurs when the creditor reports that they wrote off the debt and the IRS then treats that amount as taxable income. That may seem unfair since you didn’t pay the debt because you couldn’t afford it, but that’s the law. The IRS treats that write-off like you winning a mini-lottery and taxes you.
However, with Wilmington bankruptcy debt discharge, there are no income tax implications on the forgiven debt. That really is like winning a mini-lottery. You get the debt relief you need - and Uncle Sam won’t come knocking looking for extra taxes as a result.
If you’re stuck with unmanageable debt, consider Chapter 7 bankruptcy. Read reviews from satisfied clients, then contact the Law Offices of John T. Orcutt. Call +1-919-646-2654 now to schedule a free Wilmington bankruptcy consultation at one of our locations in Raleigh, Durham, Fayetteville, Wilson, Greensboro, Garner or Wilmington.
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