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Tuesday, February 10, 2015

Myths and truths about bankruptcy

Information about bankruptcy
Not all personal property is lost through bankruptcy
By Brennan Kliffmeuler

More people are choosing to file for bankruptcy. When a person's debts are piling up, and he or she can no longer afford to pay for basic living expenses, bankruptcy is likely the best option. However, there is a lot information about bankruptcy that is not true. Below are some of the myths and truths about bankruptcy:

Myth: I cannot file for bankruptcy if a creditor has sued me

Fact: Bankruptcy stops a foreclosure, lawsuit and wage levy immediately. Creditors are required to stop collection activities after you file for bankruptcy.

Myth: I can never get a credit card or loan after I file for bankruptcy

Fact: This is one of the most common myths surrounding bankruptcy. Even though it bankruptcy can stay on your credit for up to 10 years, it may not stop you from getting a loan or credit card. In fact, many people begin to get loan and credit card offers shortly after they file for bankruptcy.

A person who has filed for bankruptcy is actually in better financial shape than they were before. Their debt-to-income ratio has improved, and they have more money to spend. This is why creditors often exceed loan and credit card offers to people who have filed for bankruptcy.

However, it is not a good idea to get into debt again. That is why it is important for people to be cautious about applying for new credit after they have filed for bankruptcy.

Myth: I will lose all of my possessions if I file for bankruptcy

Fact: Many people are reluctant to file for bankruptcy because they believe that they will lose everything that they own. Bankruptcy laws can vary from state to state. However, all states have exemptions that protect certain assets, such as your car (up to a certain value), house, clothing and money in a qualified retirement plan. Many people will be able to go through bankruptcy and still keep everything that they have. You can keep your car and house as long as you continue to make the payments.

Myth: Every debt is wiped out after you file for bankruptcy

Fact: While most people are able to get the majority of their debt wiped out by filing for bankruptcy, there are some exceptions. Student loans, alimony and child support are examples of debts that cannot be discharged or erased.

Myth: If you file for bankruptcy once, then you cannot file for it again

Fact: You can file for Chapter 7 Bankruptcy every eight years. However, you can file for Chapter 13 reorganization more often than that. However, it is not a good idea to file for bankruptcy multiple times. It can have a negative effect on your credit score.

Myth: I should not file for bankruptcy if I do not have that much debt

Fact: A small amount of debt can be a major problem. That is why there is no minimum debt requirement necessary for filing for bankruptcy.

Myth: You should not file for bankruptcy until you are behind on your bills

Fact: Even you are making the required minimum payment on your bills, you may still be in financial trouble. Many people do not realize that they are having financial problems until it is too late. This is why bankruptcy may be a good option even if you are able to make the minimum payment on your bills.

Myth: It is difficult to file for bankruptcy

Fact: Filing for bankruptcy is a lot easier than many people think. However, it is a good idea to hire an attorney, so he or she can guide you through the process of filing for bankruptcy.

Myth: Everyone will know that I have filed for bankruptcy

Fact: Some local newspapers do print the names of people who have filed for bankruptcy. However, many people file for bankruptcy, and most publications do not have the space to list every single name. Most likely, no one will know that you have file for bankruptcy except for your creditors.

Myth: Only irresponsible people file for bankruptcy

Fact: Just because a person files for bankruptcy does not mean that he or she is irresponsible. It is very easy for a person to get into debt nowadays. Many people try their best to manage their debt, but it does not always work out. Bankruptcy allows a person who has ended up a bad situation to get out of it.

Myth: Debt consolidation is better than filing for bankruptcy

Fact: The vast majority of debt consolidations companies are scam. Many people have ruined their credit because of debt consolidation companies. Even though there are a few legitimate debt consolidation companies, it is very difficult to find a legitimate one. That is why it is better to have an attorney help you file for bankruptcy, so you will be able to rest assured that you will not become a victim of a scam.

About the author: The writer of this article, Brennen Kliffmueller, is a freelance writer with a focus on financial tips and finance law. He realizes that in this world, sometimes things happen we can't anticipate, and we need the security of bankruptcy to secure our future. To this end he recommends those needing advice on bankruptcy speak with a qualified attorney from Weik Law Office. If you wish to learn more about Brennen you can visit on Google+.

Image: Gisela Giardino; "H23 BB00934850 * ...my $100 'star note'", CC BY-SA 2.0