When you are finding it difficult to pay your bills, and debt continues to stack up, it may be time to consider filing for bankruptcy. Most cases of bankruptcy happen because people find themselves stuck in a situation that caught them off-guard, like the sudden loss of a job or an illness that led to extensive medical bills.
Bankruptcy allows a person to liquidate their assets to repay much of their debt, and allows a person to start over with a clean slate. In this post, we want to sort out the facts from the fiction and set the record straight on bankruptcy.
If I file for bankruptcy, I will lose everything I own.
While it is the job of a trustee to liquidate your assets in order to repay as much of your debt as possible, this certainly does not mean you may lose everything. Many people are afraid that if they declare bankruptcy, they will be in danger of losing their home.
The fact is though, many assets are exempt in bankruptcy, and there is a very good chance you will be able to keep your home. The entire point of liquidating assets is to be able to repay lenders. If you do not have any equity in your home, meaning you owe more on the house than what the house is worth, it doesn't do much good to sell the home at a loss.
If I file for bankruptcy, I will never be able to get a loan again.
Filing for bankruptcy does remain on your credit report for 10 years, but it by no means disqualifies you for a future loan. In fact, a recent study conducted by the Federal Reserve found that 90% of people who filed for bankruptcy obtained some line of credit within just 18 months of filing. One word of caution though, expect to qualify for high lending interest rates, so keep your borrowing at a minimum.
If I file for bankruptcy, all of my debt will disappear.
Certain types of debt will not be discharged when filing for bankruptcy. This includes child support payments, alimony, and certain types of tax debt. Unfortunately, many student loans are also exempt and are seldom dischargeable.
If you are struggling with making the difficult decision to file for bankruptcy, consider seeking the help of a professional and experienced bankruptcy attorney. You will be able to sit down and discuss the options you have for filing bankruptcy, and decide together what makes the most sense and is the best for you.