As a common form of debt relief, bankruptcy is a legal process that allows a debtor to liquidate their debt or consolidate and repay their debt. The two most common forms of bankruptcy include Chapter 7 and Chapter 13 bankruptcy. Chapter 7, known as the "debt liquidation" bankruptcy, allows a debtor to liquidize a majority of their debt in a short period of time. Chapter 13, on the other hand, gives a debtor an opportunity to pay back their debt in affordable monthly payments over a period of three to five years.
While bankruptcy is such a beneficial and resourceful tool, it still has a negative stigma due to the many myths that surrounding this area of the law. Fortunately, a bankruptcy attorney with experience in this area of the law will be able to help you, as a consumer, establish the difference between fact and fiction when it comes to bankruptcy law. The following are several myths uncovered by a bankruptcy attorney.
Myth #1: Only fiscally irresponsible people file for bankruptcy.
This is far from the truth; many people who file for bankruptcy are simply in the working class, middle class, lower class, upper class and every class in between who are unable to keep up with their monthly payments. A person can reach debt in many different situations, including divorce, sudden illness, death of a spouse, car accident, or even due to unpaid student loans. Even the most financially responsible individuals may be thrust into debt and forced to file bankruptcy at some point in their life.
Myth #2: A debtor will lose everything that they own by filing for bankruptcy.
While this may appear to be true and is a valid concern for many people struggling with debt, a debtor may not necessarily have to give up their possessions to file for bankruptcy. In fact, some forms of bankruptcy can actually protect your possessions. With Chapter 13 bankruptcy, a person can save their home from foreclosure.
Myth #3: A person who files for bankruptcy will never rebuild their credit.
This myth is the least bit true. In fact, many people who file for bankruptcy are often given second chances by banks and other lenders. Sometimes, after a person faces the troubles of bankruptcy, they become even more financially aware and conservative with their spending; therefore proving that they can rebuild their credit and manage their payments. If you wish to rebuild credit after filing for bankruptcy, you may be able to open a credit card with a limited balance as long as you are sure to pay off the credit card on time.
Myth #4: Everyone will know that you filed for bankruptcy.
While it is true that bankruptcy records are public, you will most likely not be found out by anyone unless you tell them personally. The truth of the matter is that so many people file for bankruptcy that the public records are flooded with names; a person would have to search for days and be looking specifically for your name.
If you are considering bankruptcy, but believe that the negative stigma associated with filing is stopping you, do not wait to call a bankruptcy lawyer. You will be immediately informed as to your rights and the options you have, including Chapter 7 and Chapter 13 bankruptcy.
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