Bankruptcy Myths

A personal bankruptcy case, whether it is a Chapter 7 or a Chapter 13 Bankruptcy, can be a powerful tool to help stop collection of your debts, prevent creditor harassment and eliminate up to 100% of your debt. A Chapter 7 Bankruptcy, if you qualify, is a straight elimination of your general unsecured debt. A Chapter 13 is a structured repayment plan of as little as a percentage on the dollar of your general unsecured debt. The rules of the two types of personal bankruptcy cases can be found in the federal bankruptcy code. Although much has been written about bankruptcy law in popular media articles, many myths about bankruptcy still persist. When thinking about filing a personal bankruptcy, one should separate myth from fact.

MYTH #1: After the law changes of October 2005 you cannot discharge or eliminate debt anymore.

FACT: This is not true! A Chapter 7 Bankruptcy, the elimination bankruptcy, still exists, and you can still use a Chapter 7 to eliminate 100% of your general unsecured debt. Unsecured debt is debt where a creditor cannot repossess, or take back, your property for failure to pay on that particular debt. The most common examples of unsecured debt are credit cards, medical bills, payday loans, utility bills and personal signature loans. All of those types of debt can be eliminated in Chapter 7 Bankruptcy. You can even eliminate up to 90% of your general unsecured debt in a Chapter 13 Bankruptcy. However, it is true that after the law changes of October 2005, all loans obtained for the purpose of education cannot be eliminated. Despite the law changes of October 2005 you can still eliminate debt in a personal bankruptcy.

MYTH #2: If you file Chapter 7 you will lose all of your property or you must sell all of your property.

FACT: This is not true! No one who files a Chapter 13 Bankruptcy will ever be forced to sell his or own property, and most people who file a Chapter 7 Bankruptcy can avoid the loss of any of their property. Over 90% of chapter 7 filers do not lose any of their property! The jurisdiction you live in has laws, called exemptions that you can use to protect the property that you own. This includes everything from the shirt on your back to the furniture in your home to your home itself. To avoid loss of any property in a Chapter 7 Bankruptcy it is essential to obtain an accurate and realistic value of your personal and real property, and to review the exemptions of your jurisdiction.

MYTH #3: You cannot obtain credit after bankruptcy.

FACT: In most cases this is not true! After you successfully complete a bankruptcy, whether it is a Chapter 7 or a Chapter 13 Bankruptcy, you can seek to obtain credit almost right away. While the offers from creditors after a bankruptcy may not be as good as you received before you had trouble paying your debt, obtaining new credit is possible and even common. You can normally obtain new unsecured debt such as personal loans and credit cards right after your bankruptcy completes. Further, if you spend some time rebuilding your credit, which is exactly what bankruptcy will provide you the opportunity to do, you can even refinance your home or obtain a car loan. Anyone who is looking to obtain credit after a bankruptcy is well advised to review carefully any credit offers, and review their budget to determine if their household can afford the new debt payments to avoid taking on more debt than you can afford.

Read Medical Bankruptcy