Millions of Americans are living with limited savings, and the need to declare bankruptcy can come without any warning. One emergency room visit or the loss of a job could send you over the edge. The Federal Reserve found that in 2016, nearly 46% of American families would struggle to pay emergency expenses of just $400. If you are in an income zone at risk, having knowledge of bankruptcy when trouble arises is key. There are a number of misconceptions about bankruptcy, which I will notate below.
3 Common Myths Regarding Bankruptcy
- Bankruptcy means giving away your belongings: The loss of personal property, such as a home, can be devastating and many people think that filing for bankruptcy equates to giving away all personal property to the bank. When filing for Chapter 7 bankruptcy, a representative will be responsible for selling some of your property to repay creditors, but many of your possessions can be spared. In many cases, filing for bankruptcy can stop home foreclosures. Chapter 7 bankruptcy is quicker and easier than filing for Chapter 13 bankruptcy. With Chapter 13, a more elaborate and long lasting (3-5 years) repayment plan is given to repay creditors. In most cases you do not have to give up your car or home to repay creditors.
- Bankruptcy is bad for your credit score: If you have an amount of debt high enough to consider declaring bankruptcy, your credit has already been suffering for some time. Bankruptcy will be on your credit report for up to 10 years. However, eliminating accumulated debt will improve your credit score in the long run, and if you continue to not make payments on your debt, your credit score will continue to deteriorate. There are credit card options available for people who have previously declared bankruptcy. It’s never too late to start building positive credit.
- A co-signed debt only needs one of the members to declare: This is not necessarily the case. If you have co-signed a debt and your partner files for bankruptcy, creditors can still target you to receive the full repayment.
Admitting the need to file for bankruptcy can be extremely hard to do, and the thought of losing possessions is scary for everyone. However, in many cases, bankruptcy can be the catalyst you need to keep your car or pay off that mortgage. Contact Lewisville based bankruptcy attorney David Shuster to see which repayment option fits your specific needs.