Bankruptcy laws can be confusing. Unfortunately, too many people turn to the internet for answers to their questions about filing a Chapter 7 or Chapter 13 bankruptcy.
The problem? Not all the information found online is correct. Numerous false facts about bankruptcy are floating around, and you don’t want to base any decisions involving your financial future on a misconception.
Here, the experienced legal team at the Law Office of Davis & Jones, P.C., shares the truth behind five of the most common bankruptcy myths.
Myth #1: Bankruptcy Represents Personal Failure
Filing for bankruptcy is not, as many people think, an admission of failing or being financially irresponsible.
Often, the need to file for Chapter 7 or Chapter 13 arises as a result of serious misfortune. Job loss, divorce, and medical hardship frequently leave people overburdened with debt. Instead of thinking of bankruptcy as a crutch, consider it a tool that can allow you to take control of your financial future.
Myth #2: Bankruptcy Means Giving Up Your Possessions
No, the bankruptcy court is not going to have a garage sale to pay off your creditors.
The law allows you to protect (“exempt”) some of your property when you file for Chapter 7. What you can exempt differs from state to state, so working with an experienced attorney is to your benefit. Exemptions cover part of the equity in your home and car and cover many other personal belongings. Other property is simply not worth taking. No one wants your rusty old barbeque!
Chapter 13 protects you when you do have assets that could be taken in a Chapter 7. Chapter 13 is designed to protect your assets. In exchange for the protection, you make a monthly payment on your debts to a bankruptcy trustee.
Myth #3: Bankruptcy Eliminates All of Your Debts
While filing for Chapter 7 can relieve you from most debts, a bankruptcy discharge will not erase all of your financial obligations.
Credit cards, medical bills, personal loans, and some other debts are generally dischargeable. However, bankruptcy may not cancel out liability for most student loans, certain past-due taxes, government fines or penalties, and domestic support obligations (child support, alimony, and related obligations). There are also some less common exceptions to discharge.
Chapter 13 can help you deal with the challenges of back taxes, back child support, and student loans.
Myth #4: Bankruptcy Destroys Your Credit Forever
Bankruptcy will affect your credit score, and the discharge can remain on your credit report for up to 10 years — but the real effect on your credit can be minimal, or maybe even positive!
Of course, the best way to stay out of debt is to avoid debt after bankruptcy. However, if you need credit, you can expect to start getting credit card offers in the mail within a month or two after your case ends, allowing you to rebuild your credit.
By eliminating the negative consequences of unpaid debts, a bankruptcy discharge may actually help your credit score. If really depends on where your score is prior to filing. We have seen many cases where credit scores in the 500’s rebound to scores in the low to mid 600’s within a year after filing.
Myth #5: Bankruptcy Puts Your Job in Jeopardy
If your employer happens to find out about your Chapter 7 or Chapter 13, you really have no cause to worry.
Your employer cannot legally fire you, demote you, take away job responsibilities or reduce your salary simply because you are filing for bankruptcy. And if you have a security clearance or professional license, the law ensures that the status will not change.
Do you want the facts on filing for bankruptcy? The Law Office of Davis & Jones, P.C., serving the greater Salt Lake City area, the Wasatch Front and the nearby northern Utah counties, can explain the Chapter 7 and Chapter 13 processes and assist you in obtaining real and effective debt relief.
Our legal team has the skill, knowledge and experience to offer expert advice on how to get the fresh financial start you need. Contact us and schedule a free consultation to discuss your bankruptcy options today.