Many people in West Palm Beach are under the impression that bankruptcy is a cure-all for their financial woes. Although many people use it to overcome their debt so they can start over financially, it is not always the ideal solution or quick fix that many perceive it to be. Anyone who is considering bankruptcy should make themselves aware of some common misconceptions so they can avoid complications.
All debt is erased
Chapter 7 bankruptcies can provide financial relief to people who are struggling with their debts. Many people are looking to get rid of their debts so they can stop creditor harassment and regain control of their lives financially. However, certain debts, such as student loans, tax liens, child support and alimony are usually not eligible for discharge. Exceptions may be available for rare situations. Debts such as mortgages, car loans, credit cards and others may qualify for discharge. But, there are stipulations in place.
Only lower incomes qualify for Chapter 7
Bankruptcy is not just a program that only moderate to low-income people can benefit from. Many people experience financial difficulty, regardless of their income. People who have substantial income or net-worth may be eligible to file for bankruptcy. However, those who have higher incomes must pass a means test before they are eligible for Chapter 7.
Assets must be liquidated
More income does not guarantee the ability to pay off debts, but it may allow someone to make structured payments through a Chapter 13 bankruptcy rather than liquidating assets completely. Often, people have circumstances that interfere with their ability to pay their bills, and these contribute to their eligibility for bankruptcy. For example, medical bills can cause almost anyone to experience financial hardship. While the medical costs may be erased in a Chapter 7 bankruptcy, someone with medical bills may also have a house and car that they do not want to lose. However, payments can be adjusted to fit the income through the debt reorganization process of a Chapter 13 bankruptcy so that bills can be paid and assets kept.
Anyone who is thinking about filing for bankruptcy should not allow the above misconceptions to keep them from doing so. It can help them to make the best of a bad situation by starting over so they can better manage their finances and credit. The bankruptcy process is often challenging for people to navigate through alone. Anyone who wants to stop creditor harassment, keep a home and vehicle and resolve debts should speak with an attorney about the situation to learn more about available options.