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Get the facts about filing for bankruptcy

On Behalf of | Sep 25, 2020 | Chapter 7 And Chapter 13 Bankruptcy |

For most people, the idea of filing for bankruptcy can seem like a financial death sentence. While going through the bankruptcy process is never easy, bankruptcy is for people who want to eliminate substantial debt and get their financial lives back on track – which is anything but a failure.

However, falsehoods regarding bankruptcy and its effects on a person’s finances can convince people that they’re better off trying to tackle their debts alone than get the help they so desperately need. Whether you are considering filing for bankruptcy or have already begun the process, here’s a few facts about bankruptcy everyone should know.

Fact: Most people who file for bankruptcy aren’t financially irresponsible

Perhaps the most pervasive misconception about bankruptcy is that only those with money management problems find themselves filing. While it’s true that some people with bad spending habits file for bankruptcy, according to the American Bankruptcy Institute, the most common reasons people file for bankruptcy are:

  1. Job loss
  2. Medical debt
  3. Divorce or separation

Fact: You won’t lose all of your belongings

If you file for Chapter 13 bankruptcy, you won’t lose your belongings since you will be repaying your debts over a three to five-year period. In Chapter 7 bankruptcy, certain items up to a specific value are exempt from the bankruptcy process. Because of these exemptions, people only have to give up their property in less than 5% of bankruptcy cases. Items such as your home, car, clothing and retirement savings will likely be exempt.

Fact: Bankruptcy won’t eliminate all debt

Some people think that bankruptcy erases every cent of debt, but unfortunately, this is not the case. While bankruptcy will discharge credit card debt, medical debt and personal loans, other debts are not dischargeable. Examples of debt you will likely still be responsible for paying off include:

  • Student loans
  • Income taxes
  • Past-due spousal or child support

Bankruptcy can eliminate your obligations to overwhelming debt and give you a second chance at financial well-being. However, it’s vital that you understand fact from fiction before you file to determine if bankruptcy is the right option for you.

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