When you’re facing overwhelming debt and have exhausted other options, you may consider filing for bankruptcy. While this has proven an effective way to gain a fresh financial start for many people, it’s still surrounded by several negative perceptions. These are often incorrect, but nonetheless, they can prevent debtors from seeking the help they need. Here's the truth behind some myths you might encounter as you determine the right solution for your situation.
What Are the Most Common Misconceptions About Bankruptcy?
1. Your Credit Will Be Ruined for Seven Years
A bankruptcy will generally stay on your credit for 7 to 10 years. Despite this, you’ll be able to start rebuilding your credit soon after filing. In many cases, the discharge of debts helps instantly improve credit ratings that have been affected by late and missing payments.
Continuing to pay bills on time will help reestablish your credit. Many people can acquire new credit or get approved for a mortgage about one year following their filing. If you are letting go of a vehicle in chapter 7, you can often get approved for financing a new vehicle even before your case is over.
2. Filing Will Make You Lose Your Car or House
Chapter 7 is a liquidation bankruptcy, which means a debtor’s assets may be sold to help pay back their creditors. However, most people find that all of their property is protected under their state’s exemption laws from the bankruptcy process.
This includes vehicles and real estate. For those with enough valuable property to exceed the exemption limits, Chapter 13 is an alternative that doesn’t involve the liquidation of assets.
3. You Must Have a Certain Amount of Debt to File
Although bankruptcy is typically used by people who have fallen significantly behind on their financial obligations, there is no minimum amount of debt required before filing for bankruptcy. This is a debt resolution option available to you regardless of how much you owe, but it must make sense for your specific circumstances. For example, you might have received a foreclosure notice on your home, or you’re being sued by creditors.
4. Bankruptcy Will Prevent You From Getting a Tax Refund
Tax refunds are typically considered part of a bankruptcy estate, but they can often be protected by an exemption. Even if your refund isn’t exempt, an experienced attorney will be able to strategize different ways to help you avoid losing it.
If you have questions about filing for bankruptcy, turn to Hurtt & Johnson, LLC, in Dalton and Calhoun, GA. Offering more than 40 years of experience, this firm has represented countless Chapter 7 and Chapter 13 debtors and will take the time to explain both options, so you can make the most informed decision. These skilled attorneys have extensive bankruptcy knowledge that they’ll use to help you navigate the legal process and create innovative strategies to address your financial problems. Call (706) 226-5425 to schedule a consultation or visit them online to learn more about their services.