Five things you should know about bankruptcy
Many of our clients come to us with no real idea of what bankruptcy is or truly means. They may have a negative perception of it based on the media or casual gossip. One of our first tasks is to dispel any untrue assumptions people have before discussing their particular debt circumstances and whether or not bankruptcy is a fit for their unique debt dilemma.
If you're not sure what bankruptcy is all about, here are five things you should know:
#1 Bankruptcy is not a 100% get out of debt free solution
Filing bankruptcy can give you serious debt relief, but not every debt can be dealt with in a Chapter 7 or 13 filing. Debts that can be discharged are credit cards, medical bills, unsecured loans, property liens (sometimes) and excess loan to value for car loans (only in Chapter 13). Student loans and taxes are a question mark, but are possible. Child support, alimony and court fines are not eligible for relief.
#2 Bankruptcy doesn't mean you'll lose everything (or even anything)
Unless you're sitting on a mountain of assets, it's likely you'll come out of a bankruptcy unscathed. Even if you're a high earner, you may not lose out big. The real key is the ratio of your debts to your assets and income. And if you're cash-strapped for sure, you have literally nothing to lose. You can even keep your home as long as you don't have a major amount of equity. Same goes for cars, personal items, computers, etc.
#3 Bankruptcy won't ruin your credit for good (or even for long)
If you've got bills you can't pay, your credit is already taking a beating. Filing bankruptcy will cause a momentary dip in your credit score, but it will also put an end to negative reporting on items that can be discharged or placed into repayment. And once your debts are all cleared up, creditors will lend to you again. As long as you use your new credit wisely, you'll be better off sooner than you expect.
#4 Bankruptcy can be an educational opportunity
In order to get your bankruptcy approved, you are required to complete bankruptcy counseling and debtor education. If you take it seriously, this can be the best chance to learn how to master your finances so you don't end up over your head in debt again. Even if you already know what lead to your circumstances, counseling can provide you the tools to keep your finances sorted to make the most of your fresh start.
#5 Bankruptcy is a beginning not an ending
Most clients that come to us are at the end of their tether. They're deep in debt, stressed out, coping with debt collectors and often feel like they have nowhere to turn. Filing bankruptcy may feel like it's an end that you've been pushed to. In fact, you should think of it as a new beginning – because it is. It's a financial fresh start that wipes your debt slate clean and can give you immediate peace of mind and a brighter future.
For more answers about bankruptcy or to find out how we can help you with your unmanageable debt, contact the law offices of John T Orcutt for a free consultation.