At any given time, thousands of hard-working Americans face overwhelming debt. In some cases, filing for bankruptcy might be the most practical and viable option to discharge debt and get things back on track. There are numerous myths associated with the bankruptcy program, however, so it is important to know fact from fiction before exploring one’s options.
Myth: Bankruptcy will permanently damage your credit rating
Most individuals seeking debt relief through bankruptcy utilize the Chapter 7 or Chapter 13 programs to accomplish their goals. A myth associated with personal bankruptcy is that it ruins a person’s credit rating for life. While an individual might see an initial drop in their credit score, it is likely far less than they would have experienced if they had continued to miss payments. Fortunately, with a little hard work, individuals can rebuild their credit score by sticking to a budget and taking advantage of the benefits of secured credit cards – among other strategies.
Myth: Bankruptcy requires the liquidation of all large assets
Another myth about bankruptcy is that filing a petition means an applicant will lose his or her home. In fact, bankruptcy halts the foreclosure process upon the filing of the petition. As is often the case with Chapter 13, it might be possible to retain ownership of a house, vehicle, vacation home and other physical property while restructuring one’s payment plan to continue to pay down debt without having to liquidate major assets.
Myth: Bankruptcy is exactly the same for everyone across the country
Even as a federal program, the bankruptcy process has slight variations in different states. In large part, the variations relate to what are known as exemptions. Each state allows certain assets to be exempt from liquidation in the bankruptcy process.
The bankruptcy process is complex and directly tied to the unique financial circumstances you are currently facing. It is wise to thoroughly research your options and discuss the benefits of bankruptcy with a legal professional before deciding on a course of action.