How & When Bankruptcy Can Help You

At some point in life, most people experience times of financial hardship or stress. These times can be trying for any individual, family, or business. Though bankruptcy often comes with a negative stigma, the truth is that it can be a viable option for those pursuing a new start and freedom from debt. At the Law Offices of John T. Orcutt, we provide legal assistance for those seeking financial freedom through bankruptcy.

Types of Bankruptcy

There are two main types of bankruptcy for individuals or small business owners: Chapter 7 and Chapter 13.

Chapter 7 Bankruptcy

Chapter 7 filing is referred to as a “fresh start” bankruptcy. With this type of bankruptcy, you will be relieved of nearly all unsecured debt (not including legal fines, child support, or student loans). Trustees may sell nonexempt property in order to pay creditors, but a Chapter 7 case basically means the court does not expect you to ever be able to pay off your debt.

This process typically takes place over a period of 3-4 months. Each state has thresholds based on income and household size to determine eligibility for filing for Chapter 7 relief. You are eligible if the court determines your disposable income to be 0. If you do have disposable income, you will likely be unable to qualify.

Chapter 13 Bankruptcy

When filing for Chapter 13 bankruptcy, the court determines how much disposable income the debtor has available for debt repayment, and requires that amount be paid toward the elimination of their debt. With a Chapter 13 case, the debtor is expected to slowly pay off their debt over a period of 3-5 years, typically. For this reason, it is often referred to as the “wage earner’s repayment” bankruptcy. A debtor that is found to have any amount of disposable income will likely only qualify for Chapter 13 bankruptcy.

The Benefits of Declaring Bankruptcy

So, you may know which type of bankruptcy you can qualify for, but are now wondering, “Is it worth it?” It can be intimidating starting over from scratch, but it can also be liberating. And with no other way to escape your debt, it may be the best option. Some other benefits of filing for bankruptcy include:

1) Elimination of your debt

Perhaps the most obvious benefit: you receive relief from the overwhelming demand for money you do not have.

2) Bankruptcy can help your credit score recover quicker

Although it’s a black mark on your credit report, eliminating your debt in 6 months or less (Chapter 7) or even a few years (Chapter 13) allows you to begin the rebuilding process sooner, as opposed to having your credit damaged by missed payments, repossessions, and defaults throughout the foreseeable future.

3) You get to keep your property

At least most of it. State laws determine what property is exempt from creditor acquisition, and filing for bankruptcy allows you to keep most if not all of yours. In North Carolina, motor vehicle protection is limited to $3500 or less.

Should You Declare Bankruptcy?

Well, it depends! Your eligibility, liquid assets, level of debt, and other financial elements all ought to be considered before making the decision to file for bankruptcy. If you seem stuck in your debt with no end in sight, it may be right for you. Fortunately, you don’t have to (and shouldn’t) make that decision alone.

If bankruptcy is the right decision for you, your Wilmington, NC, experts can help you plan your path to financial recovery. You can begin making better financial decisions right now. At the Law Offices of John T. Orcutt, we offer the wisdom of years in financial consulting and expertly handling bankruptcy cases throughout North Carolina.