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The prevailing notion is that you have to be in dire financial hardship to file for bankruptcy protection, but in fact, you can get far better results from your bankruptcy if you don’t wait until you hit financial rock bottom to file for debt relief. Bankruptcy can not only address existing financial issues but can prevent undue (and avoidable) future hardship as well. Many of our clients knew they were in financial trouble before the worst results happened, but felt like they had to be in a “last resort” situation before acting.
In fact, while we can certainly help people who are at their wit’s end, we can also help those who are not at this point, but merely on the path toward this inevitable result. Bankruptcy is a strategic tool to prevent your financial circumstances from worsening further. Below are seven common circumstances we see people seeking to address by filing bankruptcy - these are situations we can help you turn around with a well-timed bankruptcy filing:
#1 Backlog of Medical Bills – Roughly half of our clients come to us because they are overwhelmed with medical bills due to an accident or illness of themselves or a dependent family member. Many of these are people that have insurance but cannot afford deductibles, co-insurance, copays or out of pockets costs. And for those that aren’t insured or are under-insured, even a minor illness can be financially disastrous. All of these bills can usually be discharged in a bankruptcy.
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#2 Loss of Income – Many of our clients have lost their job, experienced a lengthy bout of unemployment or had a small business go under. Even if you have a financial cushion and some savings to fall back on, depending on the size of your debts, the length of your unemployment or if you have experienced a serious downslide in salary from your previous job to your current one, you may have far more debts than you can service. The majority of personal and small business unsecured debts can be cleared in bankruptcy.
#3 Back Taxes – If you owe back taxes that you simply cannot afford to pay, you may be able to have these discharged in bankruptcy depending on the circumstances. If you filed your tax returns on time but couldn’t pay what was owed and if the debt has been outstanding longer than two years, unloading older taxes in bankruptcy may be a simple process. If you filed returns late or didn't file, the IRS will likely protest. Your attorney can advise you on your eligibility.
#4 Retirement Concerns – If you’re nearing retirement age and have debts piled up that will compromise your financial stability into your golden years, you may want to discharge debts you can’t afford and protect your future when you will no longer have income coming in. Most retirement accounts are protected during the bankruptcy process so you should be able (depending on your circumstances) to alleviate debts you can’t afford without losing your retirement funds.
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#5 Pre-Marriage Debt Dilemma – If you are planning on getting married and you or your prospective spouse has more debt than you can pay, there’s no reason for you to bring that debt into your new union. If the indebted party files (and qualifies) for bankruptcy relief you may be able to come into marriage with a financial fresh start. This can strengthen your new marriage by putting an end to financial stresses before they impact your relationship.
#6 Long-Term Disability – If you have been disabled due to an accident or illness, you may be scraping by on unemployment and/or disability payments and can no longer afford to service the debts you incurred when you were healthy and fully employed. If your situation is permanent, seeking debt relief in bankruptcy can make living on your limited income much more manageable. Bankruptcy can cancel out medical debt, credit card bills and other accumulated expenses that your disability check won’t cover.
#7 Student Loans – If you have a high student loan balance and you are struggling to make your payments and this circumstance has existed for a while and is likely to continue, you may be able to get relief in bankruptcy. In order to request relief from student loans in bankruptcy, your attorney will need to file an adversary proceeding along with your debt petition. Without this additional legal proceeding, this debt cannot be forgiven.
Bankruptcy is a safety valve to prevent individuals from being buried by debts they can never repay. While it’s not something you should file if you can afford your debts, if you cannot pay them (for any legitimate reason) filing bankruptcy before you hit financial rock bottom will get you a better result than waiting. Contact a reputable North Carolina bankruptcy attorney like John T Orcutt to discuss your unique circumstances. We offer a free consultation where we will review your debts, income and particular situation so we can offer the best advice on whether you’re eligible for bankruptcy relief and how to get the most relief possible.