Common Misconceptions About Personal Bankruptcy
Dealing with overwhelming debt is difficult enough; bankruptcy myths should not add to the stress. With that in mind, here is a look at common misconceptions about bankruptcy, in addition to an exploration of how bankruptcy can be useful in the right situation for Indiana debtors.
Bankruptcy Myths
You can't file for bankruptcy: Although a 2005 change to bankruptcy laws made some requirements more stringent, a means test will help debtors determine whether they are eligible for Chapter 7 bankruptcy. If they aren't, Chapter 13 bankruptcy is an option. It is commonly believed that bankruptcy became much more difficult to file, but it is still available to a wide number of people. While there are limits on the number of times a person may file for personal bankruptcy, it is still possible to do so more than once.
Your credit will be trashed: Bankruptcy affects your credit rating for up to 10 years. The truth is, however, that most people considering bankruptcy have credit issues already. In addition, you can take steps to rebuild your credit before the 10-year period is over.
You'll lose your retirement savings, house and car: While Chapter 7 bankruptcy requires nonexempt assets to be sold, people with more significant assets typically choose Chapter 13 bankruptcy. No matter which bankruptcy plan you choose, 401(k)s and IRAs are exempt from liquidation.
Bankruptcy Benefits
While it may be a difficult decision to go through Chapter 7 or Chapter 13 bankruptcy, the benefits can be significant:
- Creditors must stop harassing you if you declare bankruptcy.
- In Chapter 7 bankruptcy, most of your unsecured debt will be discharged; in Chapter 13 bankruptcy, most of your unsecured debt will be restructured or discharged.
- The bankruptcy will be off major credit reports in seven to 10 years.
For people for whom bankruptcy is the right choice, the benefits will outweigh the drawbacks. It is important to understand both, however, and that is why anyone considering bankruptcy should consult an experienced attorney.
Source: 5 Myths About Personal Bankruptcy
