According to recent estimates, the average American household carries approximately $15,983 in credit card debt, according to NerdWallet. But this is just the average. Keep in mind that many households also carry large mortgages, student loan debt, medical debt, and other forms of debt, all of which can hurt their credit and make it challenging just to meet monthly expenses. If you’re struggling to pay your bills due to excessive debt, a Lowcountry Bankruptcy Lawyer might be able to help. But before you file for bankruptcy, here are five common myths about the process that you should understand.
Myth #1: Student Loans Can Never be Discharged in Bankruptcy
This is not entirely true. Yes, most federally backed student loans are non-dischargeable through bankruptcy. But some student loans are actually dischargeable. Here are a few examples of loans that can be discharged:
- Private loans that are not backed by the government;
- Federal loans, if you can prove undue hardship; and
- Federal loans, if you can prove total and permanent disability (TPD).
If you think you may qualify for a student loan discharge based on any of these grounds, you should call and speak with a qualified and experienced South Carolina bankruptcy lawyer to determine your options.
Myth #2: You Can Never Discharge Obligations from a Divorce Court
Again, this is only partly true. Domestic Support Obligations (DSO) are generally not dischargeable through bankruptcy. However, some things – such as property division – may be dischargeable in a Chapter 13 bankruptcy, but it will depend on the actual language in the divorce court order. This is why it is so important to work with an attorney who is well-versed in both bankruptcy and divorce law.
Myth #3: If You Go Bankrupt, Your Spouse Has to Go Bankrupt Too
Nothing could be further from the truth. Bankruptcy is a method of resolving or discharging debt obligations. If you and your spouse share a lot of debts as joint account-holders, then it may make sense to both file for protection under the bankruptcy laws. But if one spouse is the primary breadwinner who holds almost all of the debt in his or her name individually, it may make sense to just have that person file. If the non-filing spouse has debts, those will remain that spouse’s obligation, but this may be an option in some situations.
Myth #4: You Have to Use Chapter 11 if You Own a Business
It depends on the business. Chapter 11 is also known as a business restructuring bankruptcy, meaning it is designed to spread out and pay debts over time. The goal of a Chapter 11 bankruptcy is to help a struggling company stay in business. While there are times that a Chapter 11 will be appropriate for a small business, it’s certainly not the only option. If you are a sole proprietor, then you are not technically a separate entity from your business. This means your business’s debts are your debts, and you can generally use a Chapter 7 or 13, assuming you otherwise qualify.
Myth #5: You Don’t Need a Lawyer to File for Bankruptcy
This is actually true. You do not technically have to use a lawyer to file your bankruptcy petition. The bankruptcy courts provide forms and other resources for low-income filers to get the job done. That said, many people make tragic mistakes by failing to disclose overlooked assets or failing to properly identify the income for means tests. Seemingly minor mistakes can make things much worse. Usually, the cost of hiring an attorney is well worth avoiding the headaches of an improperly filed petition. If you need help with a bankruptcy, call the David Aylor Law Offices today.