5 essential facts about bankruptcy

While filing for bankruptcy isn’t something that anyone wants to do, it’s not the gloom-and-doom scenario that some would lead you to believe.

For most people, being overwhelmed by debt isn’t the result of a personal flaw, but rather circumstances beyond their control, such as accruing enormous medical debt. For these folks, filing for Chapter 7 or Chapter 13 can be a positive step to restore their financial freedom.

Overcoming bankruptcy myths

Too many people are discouraged from taking advantage of federal bankruptcy laws, and often it’s creditors who want to keep them from exercising those rights. An experienced bankruptcy attorney will help you through the process while addressing these five common issues and more:

  • You don’t lose everything: Under Chapter 7 rules, you will likely keep a lot of your possessions, such as houses, cars, furniture and other items deemed “exempt.” Under Chapter 13, you keep all of your assets while their value figures into a repayment plan.
  • Not all debts are forgiven: Typically, bankruptcy includes the discharge of credit card, personal loans and medical debts. That forgiveness does not usually include child support or alimony payments, recent tax bills or student loans.
  • Bankruptcy doesn’t equal failure: Statistics show nearly two-thirds of all bankruptcy filings are related to massive medical debt. Studies also show that stagnant wage growth or unemployment is more likely the cause than financial mismanagement.
  • Paying your bills isn’t always the best decision: Bankruptcy can be the best option for restoring good credit and a brighter future. As a general rule, it’s likely the smart choice when your debts are more than half of your yearly income, and there’s little chance of paying them off within five years.
  • Bankruptcy doesn’t destroy your future: While bankruptcy can remain on your credit report for seven to 10 years, your credit score is more likely to tick upward again within a few months. You can take other steps, such as getting a secured credit card to restore your financial standing.

Consider all the benefits

In Louisiana, too many families are only one tragedy away from finding themselves in financial hardship. That could mean a medical diagnosis, or a personal loss, such as losing their job. By working with a knowledgeable lawyer, bankruptcy stops creditors from harassing you, avoids foreclosure or repossession proceedings and finds a positive way to help you deal with overwhelming debt.