Being steeped in debt makes daily life an uncertain slog. Getting out from under a mountain of debt is possible with a little help from a professional and a few clever tools. Bankruptcy is one such tool, though the thought often drives people away before they get the facts.
The reality is that most people know more falsehoods and half-truths about bankruptcy than they know hard facts. If you are struggling with debt, one of the best ways you can advocate for yourself is to speak to an experienced attorney. They will give you specific details on your situation and help you make a plan to get your financial life out of its slump.
Facts and fiction about getting debt free
Each situation is different and only a professional can give you concrete legal advice. In the majority of situations, however, these are things most people have wrong about filing consumer bankruptcy:
I will lose everything – FALSE
When filing Chapter 7 bankruptcy it is a fact that much of your property will be liquidated, but there are several exemptions. You will be able to retain everything from homesteads worth up to $150,000, to businesses, to power tools and firearms up to a certain value.
All my debts will be cleared – FALSE
Chapter 7 bankruptcy only affects your “unsecured debt”, or debt not backed up by collateral. For example, medical bills may be eliminated but the remaining balance on a financed speed boat will not. Chapter 7 will also not erase student loans, spouse or child support or recent income taxes.
Bankruptcy only buys time – FALSE
Several people think that bankruptcy is only a holding pattern for their creditors and they will need to eventually pay everything in full. This is not only wrong, but if the value of your liquidation is less than your total debt, the difference is still erased.
My credit is destroyed for good – FALSE
Bankruptcy will appear on your credit report for the next 10 years, but not a day longer. It will be more of a challenge to receive credit in that time, but not impossible. There is nothing stopping you from starting to build good credit the first day after filing.
Filing will ruin my reputation – FALSE
Filing for bankruptcy is public record, but those records are virtually never publicized. Unless someone is specifically sifting through the thousands and thousands of bankruptcy petitions that are filed each year, no one except you and your creditors will know.
Bankruptcy is expensive and complicated – FALSE
There are a handful of meetings, seminars and stacks of paperwork to fill out, but with the aid of a professional, bankruptcy is a fairly straightforward process. Additionally, in most cases the cost of a bankruptcy attorney is taken directly out of your liquidation funds, meaning not cost to you.
I will destroy my spouse’s credit by filing – FALSE
Married couples often choose to file bankruptcy together because they have a significant amount of shared debt and exceptions usually increase when filing jointly; this is not required, though. If one spouse chooses to file singly, the other’s credit remains unaffected.
Cutting through the misinformation hovering around bankruptcy is one of the best first steps a person can take to get their financial life back on track. Choosing to file is a major decision, but it helps thousands of people escape bad situations and move toward a better, debt free life.