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Columbia Bankruptcy Law Blog

What happens when someone files for Chapter 7 bankruptcy?

For many Americans, debt is simply an unavoidable fact of life. But what happens when debt piles up to the point where it is out of control? For many people facing this issue in South Carolina, personal bankruptcy is an option that may make sense. The most common of these individual bankruptcy types are Chapter 7 and Chapter 13 bankruptcy. 

Chapter 13 bankruptcy is more of a repayment assistance system, wherein the filer has some discretionary income and can pay down some debts. Those filing for Chapter 7 bankruptcy, meanwhile, are in a much more challenging situation. In these cases, a trustee is appointed and can sell nonexempt assets such as a car or house at will to creditors. Typically, these assets must be of little worth and have no equity for Chapter 7 bankruptcy to be utilized.

The pros and cons of bankruptcy

Are you worried what your extended family or close friends will think if you file for bankruptcy? Many South Carolina residents agree that the negative stigma attached to filing for debt relief causes some people to avoid their most viable options for regaining financial stability down the line. If you're able to set your worries aside, you may find that support is available, and often only a phone call away.  

As with most major life-changing decisions, there may be benefits and downsides to choosing bankruptcy to help you overcome a financial crisis. Once you know more about the potential pros and cons, you can weigh the balance and determine if seeking this form of debt relief is in your best interest. It also helps to talk to others who have successfully navigated the bankruptcy process in the past.  

Should South Carolina resident file Chapter 13 bankruptcy?

Credit scores play a large part in the financial decisions that a South Carolina resident makes. Anytime one applies for a loan, the credit scores are checked. In fact, the majority of the time when one even applies for a new apartment or a new job, his or her credit score is checked. As a result, some individuals fear that a bankruptcy will have such a dramatic affect upon their credit score that they do nothing rather than take the necessary steps to get out of financial trouble.

The simple fact is that once the individual has reached the point where bankruptcy is a viable option, his or her credit score is already low. At this point, the individual is having trouble making payments and is probably delinquent in making payments. The credit score has already suffered as a result of these financial troubles.

Misconceptions about a South Carolina bankruptcy

There are a number of misconceptions associated with filing for bankruptcy. Many South Carolina residents may be concerned that they will lose everything by filing. Or, perhaps they believe that all of their friends and relatives will discover that they filed. In reality, it is unlikely that friends or family will be aware unless the individual chooses to disclose the information, and more than likely, he or she will be able to keep most if not all of his or her possessions.

Under Chapter 7 bankruptcy, the majority of the individual's debts can be discharged. While it is possible that some assets will be sold to pay some of the debt, many assets are considered exempt. This means that the individual will be able to retain these assets unless they are currently financed and are being included as a part of the bankruptcy. It may be possible to reaffirm debts such as a car loan or mortgage so that these debts are not included in the bankruptcy.

Medical debt and credit cards

Debt collectors can be quite persuasive. They can often make the South Carolina resident feel as if they must make payments regardless of the situation. The simple fact is, when it comes to medical debt, the average individual often finds it difficult to keep up with the mounting debt.

There are often a variety of options to handle such debt; some of these options are financially more advantageous than others. It may be possible to make payment arrangements with the hospital or doctor's office. Sometimes arrangements can be made that are affordable for the individual. However, in the case of an extensive bill or ongoing medical problem, this may not be possible.

Foreclosure can be prevented for many South Carolina families

Once financial problems start, they just seem to escalate. At first, the South Carolina resident has trouble paying bills. Then, the phone starts ringing and collection notices appear in the mail. Finally, the bank or mortgage company threatens foreclosure. What began as perhaps a small financial problem can quickly turn into a financial catastrophe.

In many instances, mortgage companies will work with the borrower in an effort to avoid foreclosure. At times, it may be possible to restructure the mortgage so as to lower payments. In other cases, leniency may be granted to allow the borrower to catch up with missed payments. If the borrower has filed for bankruptcy, he or she may even be able to reaffirm the mortgage debt, catch up on missed payments and continue paying so that the home is not affected by the bankruptcy.

Eligibility for Chapter 13 and Chapter 7 is not guaranteed

South Carolina is by no means a stranger to the fluctuating economy to which other states in the nation are regularly exposed. Whether you've lived here for decades or are a newcomer to the state, you likely understand how challenging it can be to overcome significant financial problems when they arise. Perhaps you've already rebounded from such situations a time or two in the past. If so, the type of solution you chose may have greatly affected your outcome.  

If your finances veer way off track, you may decide that you need to file bankruptcy. This type of debt relief often helps restore financial stability in the long-run while bringing immediate relief that enables you to satisfy existing debts as well. There are usually several bankruptcy options available to those who qualify. The key is to seek clarification ahead of time regarding the eligibility requirements and the options that work best in which situations.  

Don't let temporary financial problems cost you your home

You may be one of many South Carolina residents who recently suffered a major financial setback due to loss of employment, medical emergency or some other unexpected situation. Then again, your spending habits may have simply gotten out of hand, which also often leads to serious financial crisis. In any event, many people have gone through similar experiences in the past.  

The key to restoring financial stability depends on the individual factors of your particular situation. Things may get worse before they get better. It can be very scary to face the threat of foreclosure or possible bankruptcy. You've always done your best to provide for your family, which is why unexpected financial crises can cause high levels of stress. You can take comfort in knowing that there are support resources available to help you find a solid solution to your current financial problems. 

Is all your debt dischargeable?

Overcoming a serious financial crisis is definitely no small matter. Sometimes, it's simply a matter of adjusting your spending habits while other situations are not so easily rectified. Perhaps you've been considering bankruptcy as a debt relief option, which many people in South Carolina have filed for in the past to get things back on track when their finances got out of whack. Bankruptcy stays on your credit report for quite some time, which is one of the reasons some people hesitate to file. 

Others choose it as their most viable option, however, because it's one of the swiftest means for obtaining immediate debt relief and reorganizing a budget to set the tone for restored financial stability in the future. The bankruptcy code regulates this debt relief system. It's always best to seek clarification of laws that may apply to your situation before determining which route to take. There are several types of bankruptcy and not all debt is dischargeable under each.  

Medical debt a problem for middle class South Carolina residents

There are a number of misconceptions regarding bankruptcy. Some believe that bankruptcy is only for the wealthy trying to avoid paying debts that have spiraled out of control. Others believe that bankruptcy is used by individuals who have somehow wasted their money and are now looking for a way to escape their situation. Yet, reality for the South Carolina resident is that the majority of those who can and do benefit from bankruptcy are average, middle-class individuals and families.

Research indicates that the average person who files for bankruptcy has a job, a house and a family. However, some life event occurred that changed the family's financial picture. Perhaps one of the individuals lost their job, a divorce occurred or a family member became seriously ill. These are the most common causes of bankruptcy, yet in many cases, they are unavoidable.

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