Most people think of “bankruptcy” as a dirty word. They would much rather spend decades slowly paying off crippling debts instead of understanding the process and truth behind bankruptcy. In reality, it is a positive option for a lot of people who need financial help. It can give you a fresh start in about two years and allow you to thrive financially once again.
Of course, most people don’t really know enough about bankruptcy to understand that it can be a positive thing. Accordingly, here are 5 myths about bankruptcy that we want to tell you the truth about:
It Will Permanently Wreck Your Credit Score
Filing for bankruptcy will indeed have a negative effect on your credit score. Often, when you are so overwhelmed with debt that you decide to file for bankruptcy, your credit score is not in a great place to begin with. However, that does not mean your credit score will never rebound.
Credit scores range from 250 to 850. The Federal Reserve Bank of Philadelphia found that the average credit score at the time of filing for bankruptcy was 538. A mere eight months later, the average credit score had already risen to 620. You can even get a new credit card immediately after filing for bankruptcy – although it may be secured and much smaller than you are used to.
Married Couples Have to File Together
If a married couple shares the debts in question, both spouses will have to file for bankruptcy. However, if only one spouse is wracked with debt, they can file independently and nothing will happen to their spouse’s credit. This is a common occurrence, especially with couples getting married later in life and having more personal financial history.
All Your Debt Will Be Gone
How much of your debt your bankruptcy will forgive depends on a few factors. Chapter 7 Bankruptcy discharges your debts, while Chapter 13 Bankruptcy creates a realistic payment plan to pay off your debts over a period of three to five years. Anyone can apply for Chapter 13, while Chapter 7 is selective.
However, some debts are excluded from bankruptcy no matter how you file. Debts from child support payments, alimony, student loans, and most taxes are not legally allowed to be forgiven under any circumstances. You’ll still have them even after a successful bankruptcy.
You Will Lose Everything You Own
Filing for bankruptcy is far from a decree that you will lose your home or car. In Chapter 13 Bankruptcy, you can keep your property as long as you are making regular payments. With Chapter 7 Bankruptcy, some of your unexempt possessions may be sold, but most people who file are able to protect their possessions by using their exemptions.
You Can Do It Yourself
Here’s the truth: bankruptcy is not a long, difficult, or particularly selective process. However, it is a complicated one. If you are ready to look into your bankruptcy options, you need to talk to someone who has experience with the process. At Velazquez Consumer Law, LLC, we know all about bankruptcy. Contact Velazquez Consumer Law, LLC today to discuss your options! We work hard to provide solutions and shield you from surprises!
Velazquez Consumer Law
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