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Bankruptcy Facts - Get the Basics Before Filing Personal Bankruptcy
Deep in debt? Fallen behind on payments? You're not alone—nearly 1.5 million people filed bankruptcy in 2009 to gain relief from their debt. The questions is: Could bankruptcy benefit you?
Filing bankruptcy has helped many Americans resolve their debt, stop creditor harassment, stop foreclosure and get back to living. Check out these pages to gain a basic understanding of personal bankruptcy:
Bankruptcy Myths - What Really Happens in Bankruptcy?
- Bankruptcy Myth 1: Bankruptcy ruins your credit for 10 years. This is a popular myth and may scare some people away from seeking bankruptcy protection. Here's the truth: a bankruptcy filing remains on a filer's credit report for up to 10 years. But the impact bankruptcy has on credit diminishes as time passes, assuming the filer begins filling her credit report with positive credit actions. What really ruins a person's credit is maxing out credit cards, missing payments, defaulting on loans and otherwise engaging in financially irresponsible behavior.
- Bankruptcy Myth 2: Filing for bankruptcy means you'll never get credit again. This links to the first myth and plays into some similar misunderstandings about how credit works. Because bankruptcy only stays on a person's credit report for 10 years, after that period there's no reason potential creditors would even know about a past bankruptcy filing. It's true that in the months immediately following a bankruptcy filing, it will be difficult to get credit cards and other loans, but, again, as time passes and a filer demonstrates by timely payments and responsible credit use that she is a worthy credit risk, getting credit becomes easier.
- Bankruptcy Myth 3: The bankruptcy court will sell all your belongings. While it's true that Chapter 7 bankruptcy is sometimes called "liquidation," the exact meaning of that liquidation is often misunderstood. Certain federal and state laws (called exemptions) explicitly protect certain property from liquidation sales. Protected property generally includes anything necessary to ordinary life, such as a home, a car, clothing, books and work tools. Some states even protect a certain amount of money in savings accounts.
- Bankruptcy Myth 4: It's okay to max out credit cards right before filing. This myth is also untrue. Bankruptcy law is designed to offer financial relief to people who truly need it to survive and so has special provisions against discharging certain debts. These debts include those for luxury charges exceeding $550 charged within 90 days of the filing of the case and those for cash advances exceeding $825 taken out within 70 days of filing.
Connect with a Bankruptcy Lawyer
A local bankruptcy lawyer may be able to help you understand how filing personal bankruptcy may affect your personal financial situation. We can connect you—for free and with no obligation—with a local bankruptcy lawyer. Simply fill out our free bankruptcy evaluation form or call 877-833-2410 to get started today.