If more than half of your income goes to paying down debt, it may be a good idea to file for bankruptcy. The same might be true if you don’t think that you’ll be debt-free in five years despite cutting back on expenses. Take a look at some of the benefits of filing for bankruptcy in North Carolina.
Your credit score might go up
According to Equifax, debtors who filed for Chapter 7 bankruptcy in 2010 saw their credit scores increase from 538.2 prior to filing to 620.3 after their cases were discharged. Individuals who filed for Chapter 13 protection in that same year also saw their credit scores go up if they obtained a full discharge. Data from the Department of Justice indicates that about half of Chapter 13 cases filed between 2007 and 2013 were dismissed.
Put an end to collection calls and lawsuits
You will likely receive an automatic stay of collection calls or letters when you file a bankruptcy petition. In the event that a debt is eliminated in a Chapter 7 or 13 proceeding, any lawsuit related to it will usually be dropped. If your wages are being garnished, the garnishment might also come to end after receiving a discharge.
Be sure to file for bankruptcy in a timely manner
Ideally, you will file for bankruptcy before dipping into an IRA or 401(k) to make a past-due loan payment or to settle a medical debt. Generally speaking, retirement savings are exempt from being seized in a Chapter 7 or 13 case.
If you’re struggling to pay down debt, seeking protection from creditors may be an effective way to eliminate or reduce your financial burden. An attorney may be able to talk more about the automatic stay and explain how to decide whether to pursue a liquidation or reorganization bankruptcy.