The decision to file bankruptcy can be difficult. While attempting to manage an insurmountable amount of debt, you may explore every other alternative to gain even some financial relief.
The many myths and misconceptions surrounding bankruptcy only add to the difficulties in making the decision to file bankruptcy. While bankruptcy can provide many with the debt relief they need, constant misguided or inaccurate information can complicate or delay your decision. Read on for four misconceptions to look out for:
Your credit will be destroyed
Whether you file for Chapter 7 or Chapter 13 bankruptcy, your credit score will likely decrease after filing bankruptcy. However, it is important to remember that this drop is not permanent and that you can take steps almost immediately to improve your credit.
Chapter 7 bankruptcy will remain on your credit report for ten years, while Chapter 13 will remain for seven years. In the meantime, you can make positive strides by taking on responsible debt like secured credit cards or loans, making on-time payments and more.
You will lose your most valuable assets
Bankruptcy does not always mean you will lose your home, car or other valuable assets. In fact, bankruptcy may help at least temporarily to save your home from foreclosure or your car from repossession. When you file bankruptcy, the court issues an automatic stay to stop creditors from harassing you or taking action against your property. After this period, discuss your options with an attorney if you have concerns about retaining your valuable assets.
Bankruptcy will relieve all your debts
Chapter 7 relieves your secured debts, like credit card debt, medical debt, personal loans and more. It does not, however, discharge unsecured debt like income taxes, child support or alimony payments and student loan debt. Yet, bankruptcy will allow more room in your budget to work toward making timely payments.
With Chapter 13 bankruptcy, you establish a workable plan to restructure your debt payments. This three- to five-year plan can allow those with a steady income to make on-time payments the breathing room they need.
Bankruptcy means failure
Many assume that filing bankruptcy means they have failed. While paying your debt according to your own time frame is an ideal solution, it is not always realistic. This may mean living for years or even decades with overwhelming debt. Bankruptcy can provide the relief you need to productively move forward.
