Misconceptions About Bankruptcy

07
March

A bankruptcy filing can restructure debts or completely eliminate debts. There are consequences to filing a Chapter 7 or 13 bankruptcy. This legal process gives debtors the opportunity to start over and improve their present credit standing. Despite the fact that bankruptcy consequences are short-term, some people hold off on filing. Bankruptcy misconceptions are widespread, and some fear that filing bankruptcy will cause permanent credit damage and public humiliation.

Bankruptcy Misconception #1: I’ll Lose My House and Possessions

Filing for bankruptcy protection doesn’t result in the automatic seizure of personal property, such as vehicles, houses, and other possessions. Bankruptcy laws vary by state; and while some debtors must relinquish their property to creditors, the majority of people who file for bankruptcy protection are able to retain their personal belongings.

Bankruptcy Misconception #2: My Friends and Family Will Know

Yes, bankruptcy filings are public knowledge. However, newspapers and courthouses rarely list the names of people who file bankruptcy. And if they do list bankruptcy cases, it’s usually business filings. Finding information about an individual debtor requires a detail search of bankruptcy records. Most people don’t have the time or patience to search these records, which protects the identity of those who file bankruptcy.

Bankruptcy Misconception #3: I Can’t Buy a House or Get a Credit Card

While a bankruptcy might stay on credit reports for up to one decade, the effects of a bankruptcy diminish with time. Bankruptcy filings open the door to a fresh start and several credit card companies will extend financing to people with recent filings. Reestablishing credit after bankruptcy and improving credit habits is key to reversing the damage and qualifying for additional loans. In fact, debtors who modify their credit habits after bankruptcy and increase their scores after filing can qualify for a mortgage loan after two years.

Bankruptcy Misconception #4: A Bankruptcy Will Eliminates All My Debts

There are limits to what debtors can eliminate in a bankruptcy proceedings. It’s common for debtors to list credit card balances, loan balances, and other personal debts in their bankruptcy petition. Understand, however, a bankruptcy does not eliminate certain debts, such as federal student loans, past due child support, and past due alimony payments.

Bankruptcy Misconception #5: I Can’t Include Past Due Taxes in the Bankruptcy

Debtors can include taxes owned to the federal and state governments under most circumstances. A bankruptcy attorney can provide information on the requirements for discharge.

This post was written by

jason – who has written posts on Budget Clowns.
Father of three and married to a lovely women. Always looking for ways to save money, and invest it properly for my children's future.

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