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Common Bankruptcy Myths Dispelled

Many people who are considering bankruptcy are scared by the process. You may fear losing your home or car, or you may feel you are going to be viewed negatively by friends, family, or the community.  Usually, these fears are based on myths that are not in reality true.  Below are some common bankruptcy myths and the truth that dispels the myth.

Myth:  Filing for bankruptcy will permanently damage my credit. Fact: It is true that filing for bankruptcy will have a negative impact on your credit.  However, any impact will only be temporary.  Furthermore, the long term effect of a bankruptcy is often an improvement to your credit because you will be eliminating substantial amounts of debt.  Also, many people considering filing for bankruptcy have already experienced significant damage to their credit.  The bankruptcy will stay on your credit for up to ten years, but that does not mean you cannot begin to rebuild your credit as soon as you receive your discharge.

Myth: Your friends, family, and co-workers will find out that you filed.  Fact:  Only your creditors, the trustee, and anyone you choose to tell will know about your bankruptcy.  Names of people who file are not published in the newspaper or any other publication.  Your case is public record and could possibly be accessed, but in reality, the only people that will search for your bankruptcy are those that you owe money to – and they will receive notice that you filed, anyway.

Myth: It is difficult to file bankruptcy, and you will probably not qualify.  Fact: While the process does require substantial paperwork, and requires you to gather documents concerning your financial condition, if you retain an attorney, they will do much of this work for you.  Furthermore, most people qualify to file bankruptcy.  The income requirements for qualification typically determine whether you can file a Chapter 7 or a Chapter 13, but not whether you qualify to file at all.

Myth:  I will not be able to purchase property after I finish bankruptcy.  Fact: Immediately after being discharged, you may have difficulty obtaining credit.  However, you will likely be able to get credit cards and maybe even auto or home loans after you are discharged.  Though, sometimes, these loans will be with higher interest rates or less than favorable terms.  None-the-less, you can begin rebuilding your credit and over time, you will most likely be able to put yourself in a better position.

Myth: You are only allowed to file bankruptcy once.  Fact: There is no limit on how many times you can file bankruptcy.  However, there are time limits between each filing that do prevent how often you are allowed to file.  For instance, you must wait 8 years after receiving a Chapter 7 discharge before you can file another Chapter 7, but only 2 years between Chapter 13 filings.