Common Myths About Filing For Bankruptcy
The myth that all bankruptcy filers are irresponsible spenders and failures is untrue. Many good, honest, hard-working people file for bankruptcy after life events such as divorce, job loss, a medical emergency or a family crisis.
Bankruptcy is not a reflection of your character or your worth as a person. It is simply a tool to help you get back on your feet.
Myth 1: You’ll ruin your credit
A big myth is that filing for bankruptcy will ruin your credit. In reality, it can be a very positive step to reestablishing credit. Once your bankruptcy is complete, a court order (known as the “automatic stay”) stops all collection activities from your creditors including phone calls, lawsuits, garnishments and repossessions. This is a very powerful element of the bankruptcy law.
In addition, you can keep assets such as your car, home and furniture as long as they fit within the allowed exemptions in Chapter 7 or Chapter 13 of the bankruptcy code. Most people that file for bankruptcy are not poor people; in fact, many are well-off individuals who have fallen on hard times because of unforeseen circumstances such as job loss or extreme illness.
However, even if you’re able to get credit cards after bankruptcy, it will still show up on your credit report for 10 years. This is a good reason to work with a reputable bankruptcy attorney to ensure that your financial situation is managed as efficiently and as positively as possible.
Myth 2: Everyone will know
Bankruptcy is surrounded by stigma and misinformation, but many savvy people are using this powerful tool to their advantage. Generally, only your attorney, bankruptcy court officials, creditors and those who review your credit report will know that you’ve filed for bankruptcy. Your employer does not have to find out, and your family, friends and social circles usually will not either.
While you may have to sell some of your non-exempt assets, most people who file for bankruptcy don’t lose everything. State laws offer extensive coverage for assets, including your home and car, household goods and furnishings, IRAs, retirement plans, cash value in life insurance policies and wages.
Bankruptcy is designed to get you out from under debt, protect your property and lower your stress level. Often, it saves marriages. In fact, if it makes sense and is cost-effective, we recommend that husbands and wives both file for bankruptcy together to receive the full benefits of the automatic stay.
Myth 3: You’ll lose everything
There is a common misconception that filing for bankruptcy equates to financial
failure, and many people will avoid the option of filing altogether because of this stigma. This mental block can prevent you from obtaining the fresh start that bankruptcy can provide.
The truth is that it’s not uncommon for responsible individuals to experience a hardship, such as losing their job or dealing with serious medical issues. These situations can result in overwhelming debt that may require the help of a consumer bankruptcy attorney.
Fortunately, most of our clients are able to keep the property that they own in bankruptcy. This is because of state exemptions, which vary from one to another. These exemptions generally cover a person’s house, vehicle, IRAs, retirement accounts and cash value of life insurance policies. This is why it’s important to consult with an experienced bankruptcy attorney to learn more about how these laws apply to your specific case.
Myth 4: You’ll be sued
Filing for bankruptcy is not a crime. However, many people who have filed do not understand what that really means and how it will affect them in the future. This often leads to a lot of anxiety and worry.
Bankruptcy does not stop creditors from suing you. It simply gives you a fresh start and allows you to manage your debts more effectively.
Depending on your situation, you may be able to keep all of your assets and property in Chapter 7 bankruptcy. This is because state law has a long list of exemptions that allow you to keep all or most assets, including primary residences, vehicles, land, household goods, tools, furniture, appliances, benefits, life insurance claims and even inheritances.
In addition, you can still obtain a mortgage or car loan after bankruptcy. You just need to wait a certain amount of time, and most lenders will work with you. If you are having financial difficulties, contact an experienced bankruptcy attorney to discuss your options. Working with an experienced professional is best. Sites like https://www.ljacobsonlaw.com/pa/york-bankruptcy-attorney/ will have a lot of available resources to help.