There are a number of myths that surround bankruptcy, and this is likely because bankruptcy law is rather complex. Due to these myths, some people opt to stay in debt instead of filing for bankruptcy. This can lead to severe financial ruin. Keep reading to learn what some of the most common myths are so that they won't scare you off.
You Will Lose Everything
This is likely the most common myth that is associated with bankruptcy, but at the same time, it is also the most incorrect. Both Chapter 7 and Chapter 13 bankruptcies have exemptions that allow you to keep at least some of your possessions. Chapter 13 is more flexible than Chapter 7. Regardless, if you want to retain any of your possessions, you can continue paying for those debts.
Your Credit Will Be Ruined
When the filing of the bankruptcy is official, it will remain on your credit report for seven to 10 years, depending on the type of bankruptcy that you file. However, this does not necessarily ruin your overall creditworthiness. A number of people will see an improvement in their credit after a year or two. This is due to the fact that you will be cleared of your debts once you file, which means that you will be able to save money and start paying your bills on time. In addition, your debt-to-income ratio levels will begin to level out.
Everyone Will Know That You Filed
While it is true that bankruptcies are indeed a matter of public record, there is essentially no reason for your information to be shared—unless you are a celebrity. There are thousands and thousands of people who file for bankruptcy every single day. So, unless you have family and friends who check the local bankruptcy filings on a regular basis, it is highly unlikely that anyone is going to know that you filed for bankruptcy unless you tell them directly.
Legal Action Can't Be Stopped Once It Is Started
When you file for bankruptcy, there is something called the automatic stay that takes place. This process will stop any and all collection efforts from creditors. They will not be able to call you any longer, garnish your wages, repossess any vehicles, foreclose on your home, or file a lawsuit against you. This level of protection will last throughout your case and generally becomes permanent as soon as your bankruptcy is finalized.
For more about this topic, contact a bankruptcy attorney.Share