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Did you know that Abraham Lincoln filed for bankruptcy? If honest Abe were here today, he’d be the first to explain that bankruptcy is not as harrowing as some may believe. Like most complicated legal processes, bankruptcy is often surrounded by myths and misinformation. If you are considering bankruptcy, it is essential to do your research and consult an experienced Chesapeake bankruptcy attorney to determine if it is the right solution for you. Read the following guide to debunk some of the most common myths about consumer bankruptcy. Only Financially Irresponsible People File for Bankruptcy While it is true that some people act irresponsibly, most individuals who file for bankruptcy have sound reasons for doing so, such as long-term unemployment, the high cost of divorce, the death of a spouse, or overwhelming medical bills. These valid reasons have forced many of the most financially responsible people to file for bankruptcy in an effort to regain control over their finances. Creditors Will Take Everything Due to state and federal exemptions, most people filing for bankruptcy lose very little personal property. Certain property and assets such as cars, homes, retirement plans, clothing, and household goods are typically protected from collection. Additionally, homes and vehicles with liens may also be kept as long as the owner is making monthly payments. Bankruptcy Can Erase All Past Debts While filing for bankruptcy allows the debtor to discharge certain eligible debts, there are several types of consumer debt that are considered to be non-dischargeable. Some of the most common types of non-dischargeable debt include child support, alimony, student loans, DUI fines, most federal and state taxes, fines or restitutions associated with a crime, and any type of fraudulent debt. Bankruptcy Will Permanently Ruin Your Credit One of the biggest myths surrounding bankruptcy is that it will ruin your credit. Although a bankruptcy filing does appear on the debtor’s credit report for 7 to 10 years, most individuals filing for bankruptcy already have a poor credit rating due to serious financial problems. Bankruptcy can actually stabilize the debtor’s credit by stopping the cycle of late payments and credit attempts. Bankruptcy also allows debtors the opportunity to rebuild their credit by obtaining a secured credit card and paying bills on time. It’s Too Hard to Qualify for Bankruptcy Protection After the 2005 federal bankruptcy revisions, many individuals wrongly assume that they won't qualify for protection under the new law. Changes made to the law were designed to reduce the amount of fraudulent claims and do not affect honest debtors in need of bankruptcy protection. You Can Only File for Bankruptcy Once Each chapter of bankruptcy has different restrictions. Consumers can file for Chapter 7 bankruptcy once every 8 years. This type of bankruptcy is typically the most popular because it is designed to eliminate unsecured debt. Although less popular, Chapter 13 can be filed more frequently as it is designed to reorganize debt rather than simply eliminate it. When considering bankruptcy, it is important to consult an experienced Chesapeake bankruptcy attorney to determine which type of bankruptcy is right for your specific financial situation.
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