In a recent interview, leading bankruptcy attorney Tony Thompson, founding partner at Thompson Law in Angeles, CA, revealed little-known facts about wiping out debt. —
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When asked for a comment, Thompson said, “Unfortunately, there are a lot of misconceptions out there about bankruptcy, which in fact provides a vast array of relief to those in debt. Here are some things to keep in mind when it comes to filing for bankruptcy.”
Many people incorrectly assume that they will lose their assets after filing for bankruptcy.
“In the vast majority of cases, filers will be able to keep their retirement, home, and car. In fact, in bankruptcy, they might be able to get an even better deal for their car. Filers can even negotiate lower car payments with lenders after filing for bankruptcy.”
Another widespread misconception about bankruptcy is that it ruins a filer’s financial future for years to come.
When asked to elaborate, Thompson said, “If there’s one thing I could educate people on about bankruptcy, it’s that it actually helps your financial future, it doesn’t hurt it. Six months after bankruptcy, the average credit score jumps up by about 100 points.”
The reasons for this, according to him, are that a filer is not allowed to declare bankruptcy for several years and that the filer has an influx of cash flow due to the debt being cleared - both of which are attractive to creditors.
Many of those considering bankruptcy are uncertain about which types of debt they'll be able to write off after filing.
"You get to write off most of your debts in bankruptcy. The overwhelming majority of your debts - such as credit card debt, medical bills, loans, past due rent, tax debts, and the list goes on - will be wiped out during bankruptcy."
Most people try to do everything they can to pay back their debts, which could actually land them in even hotter financial waters.
“People often just keep paying their credit cards, but they’re only paying the interest. And if they keep doing that, it would take 20 years for them to pay it off. I tell people that if they’re paying more than 50% of their income on their debt, then they are just never going to be able to pay it back. And the best path forward is bankruptcy to wipe out all that debt.”
When asked what piece of advice he would give to someone in debt, Thompson said, “Bankruptcy exists to help you escape your debt and to get a fresh start. I would encourage people to start doing research and stop listening to what credit card companies and banks are putting out there. Their only goal is to continue this vicious cycle of paying interest without a chance of paying off your debt.”
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