Medical bills, unemployment, death of a spouse, and other unforeseen setbacks cause people to stumble financially. Almost 500,000 individuals and businesses in the U.S. filed for bankruptcy this year, far below the peak number of 2 million in 2005. That year, one in 55 people declared bankruptcy, signaling the impending economic recession and making bankruptcy a common event.
If you’re considering bankruptcy as a way to hit “reset” on your finances, it’s worthwhile to seek some professional advice and guidance. A qualified bankruptcy attorney who knows the process in South Carolina can discuss your situation and detail your options to provide a clear picture of bankruptcy’s features and benefits.
A Brief History of Bankruptcy in the U.S.
Bankruptcy has been recognized as a financial tool since 1800, when there was, briefly, a process in place for businesses to be deemed bankrupt, albeit involuntarily. Similar laws, enacted by Congress, were introduced and repealed several times until 1898, when the Nelson Act established the framework of what we know today as voluntary bankruptcy. These processes were refined and modernized with the Bankruptcy Reform Act of 1978, which introduced the chapter-based system used today and defined rules for each type.
While there will always be debate about accepting fiscal responsibility, society has generally recognized that individuals and businesses should have access to a financial safety valve that allows them to start again. Economists, too, agree generally that bankruptcy is a useful tool to help the country recover from particularly bad eras, such as recessions.
Bankruptcy as a Tool for Survival and Success
The cost of living in America is rising faster than income, making it difficult to stay ahead of debt. Bankruptcy is the legal mechanism to seek relief from the stress and personal disruption that follows debt. Many systemic factors, which are beyond the control of any individual, influence individual debt, such as:
- Medical debt. Experts say this is the reason for about half of all bankruptcies. About 79 million people struggle to pay medical debt, which has ballooned in recent decades as insurance companies have raised rates and made rules for reimbursement more difficult.
- Unaffordable mortgages. One of the most common reasons for bankruptcy, interest on mortgages can escalate, or home values can depreciate, leaving consumers with overwhelming debt on devalued property.
- Interest and late penalties. Missed payments increases a person’s debt load through higher interest rates and added penalties. These circumstances are often accompanied by high stress, illness, and even divorce.
How and When to File for Bankruptcy
A South Carolina bankruptcy attorney from Lam Law Firm can walk you through the types of bankruptcy to determine which best suits your situation. From start to finish, the bankruptcy process can take a few weeks to execute, so it’s crucial to start before things get out of hand.
Ask your attorney which option works best for you, such as:
- Chapter 13, for consumers with a regular income. This allows debt to be discharged and non-dischargeable debt to be paid over a three- to five-year period.
- Chapter 7, requires liquidation of some assets to pay creditors while preserving necessities like a car and home. Discharge, or conclusion of the bankruptcy, can be less than a year away.
