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Common Bankruptcy Myths

Learn What’s Truth and What’s a Myth

When it comes to bankruptcy, it is common to feel uncertain about what it entails. Many people hear horror stories or varying rumors that may cause them to fear the day they ever have to file. While bankruptcy is a serious decision, the strong apprehension that many people have is unfounded. In fact, for countless individuals it has provided them relief from their debts and has been the only way they were able to move on with their life. Don't be deterred by untrue claims. Learn the facts so you can establish whether or not bankruptcy is the option that can provide you with relief. The following are a few common misconceptions.

Bankruptcy is for those with no job or no income.

It is common for people to believe that bankruptcy is only for those that are broke and have no job. There are actually many business owners as well as employees that find themselves in the position where they need to file. An individual may have a source of income but it is simply not enough to take on everything they are indebted too. It may be an underwater mortgage that they are continually paying more than they are making on. Many workers need to file even while they remain at their job. For those that have an income that is below the median level in their state, filing under Chapter 7 can be the best option. Other times a debtor may have a reasonable and steady income and they just need some assistance with being able to make it work. Chapter 13 can set up a payment plan through which they make a monthly payment.

You will lose everything you own.

A lot of people are too worried to even think about filing because they believe they will lose everything they own. There are a number of exemptions that are excluded from assets liquidated that can allow a debtor to hold on to some of their personal belongings. Exemptions may pertain to homesteads, personal property and other items that should be reviewed on an individual basis. There are restricted amounts of how much can be included in an exemption. Filing for Chapter 13 offers more of a schedule to pay on so rather than liquidating assets to cover debts, they will eventually be handled through the payments. Secured assets will be protected under the exemptions of the state through this form so individuals that may file to pay off a car, taxes, mortgages and other debts may be allowed to keep most or all of their assets.

All debts will be discharged.

There are a number of debts that are not to be discharged under the law and while not every person may owe debts such as these, a large number of individuals that file will. For those that owe from a past crime they were convicted of, bankruptcy will not allow them to avoid this obligation. Student loans will also not be wiped out, and those seeking to forego taxes will also face great difficulty. Forms of support cannot be discharged, such as child support or spousal support. A large amount of debts will be discharged for most individuals but it is to your benefit to speak with a professional before filing to have a stronger grasp on what the coming process will look like.

It's only the financially irresponsible that file for bankruptcy.

There is a big stereotype that can come along with filing and this drives many people away, leaving them to endure further hardship that could have been more easily fixed. Bankruptcy is certainly not only for the financially irresponsible. In fact a large number of people filing have been extremely cautious for years; not spending more than they had and going to a full time job each day. More and more people are dealing with challenges paying expenses with the turn in the economy. Whether it is the loss of a job or a mortgage that is now underwater, many unexpected events have left very responsible individuals dealing with ramifications they could not have foreseen.

Your credit will be damaged beyond repair.

Bankruptcy will cause a hit to be taken in terms of credit. However, for many people that are filing, there credit is often not in a good spot already and it is likely only going to continue to decline. The benefit that comes along with bankruptcy is that it can be what a debtor needs to get back on their feet. Once they are there, after a period of time they are then in the position where they can repair the damage that was done from incurring significant debt.

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Address: The Mercury Insurance Building, 1901 Ulmerton Road, Suite 435, Clearwater, FL 33762 Phone: (727) 424-2279