Submitted by Rachel R on Tue, 09/12/2017 - 9:15am
Answers to bankruptcy myth questions
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When you’re stuck with debt you can’t afford, sometimes you can work things out on your own by adjusting your budget, taking a second job in the short-term, or borrowing from friends or family until the problem is resolved. But in some cases, you can’t stop the debt free-fall without intervention. Wilmington bankruptcy can be life-changing, puts an end to many types of debt, and offers a fresh financial start. If you’ve heard bad things about bankruptcy, it’s time to learn the facts. Let’s bust five of the most common bankruptcy myths.
#1 Bankruptcy Wipes Out All Your Debts
Technically, Wilmington bankruptcy could wipe out all your debt if you had a very specific set of debt. For instance, Chapter 7 bankruptcy discharges most unsecured debt such as credit cards, medical bills, signature and personal loans, and some older income taxes. It will not lessen child support, alimony, or recent tax debts. If you’re behind on your auto loan, Chapter 7 might help you reduce the loan value to the market rate of the car if you can pay it off in a lump sum. With Chapter 13, you catch up on past-due balances on your mortgage and car loan and then some of your unsecured debt is wiped out. Depending on the case, you could pay almost nothing in Chapter 13 on credit cards and medical bills.
#2 Bankruptcy Ruins Your Credit
If you’re considering Wilmington bankruptcy, there’s a good chance your credit already took a beating, but the good news is, filing stops the free fall. The act of filing bankruptcy will cause your credit score to take a dip. However, from there, you can begin rebuilding your credit strategically. Within a few months after your bankruptcy discharge, you can get a secured credit card, use it responsibly, and then keep building from there. The Federal Reserve did a study that found that those that choose bankruptcy to deal with excess debt have a better score within just a few months than those that stay stuck in debt rather than file for debt relief.
#3 Bankruptcy Is an Option for the Irresponsible
Some people have a negative outlook on bankruptcy and see it as something for people that overspend, are bad with money, or are irresponsible in their life choices. While a small margin of bankruptcy filers might fit this bill, the vast majority are regular people with regular problems and normal habits. At our offices, what we commonly see is that people wind up in over their head with debt because of an event such as divorce, major illness, accident, job loss, or something similar. When an external circumstance slashes your income and increases expenses, you can be left struggling financially even if you’ve always been responsible with your finances.
#4 Bankruptcy Allows You to Ditch Debt You Never Intended to Repay
The underlying premise of Wilmington bankruptcy is that when you took on debt, you intended to repay it. That means when you swiped your credit card at the store, you meant to pay for the item when the bill came due. It means you intended to pay your mortgage and car loan, but something happened, and you can’t meet your obligations. Bankruptcy is not intended to excuse anyone from the debt they took on with no intent to repay. That means if you go out and max out your cards right before you file bankruptcy or take on other debt hoping you can skip out using bankruptcy, you might wind up in trouble. The bankruptcy court looks carefully to make sure you’re not trying to cheat the system.
#5 Bankruptcy Requires You to Be Poor Before You File
The truth is, to qualify for Wilmington bankruptcy, there is no cap on how much or how little you can earn and file – depending on your debt circumstances. Chapter 7 has more stringent requirements, and if you’re a low earner, it’s easier to qualify. But even if you’re raking in six figures, you may be allowed to file so long as you can show that your debt outweighs your ability to pay. Even celebrities that file Chapter 7 bankruptcy might make big bucks. What matters is the ratio of your debt to income and whether you can afford to service your debt or not. Chapter 13 repayment plans require that you have enough income to service the plan, so you might earn too little to qualify for this option.
To find out more about the benefits of bankruptcy and how to get rid of debt you can’t afford, contact the Law Offices of John T. Orcutt. Call +1-919-646-2654 now for a free Wilmington bankruptcy consultation at one of our locations in Raleigh, Durham, Fayetteville, Wilson, Greensboro, Garner or Wilmington.
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