Common Bankruptcy Myths Debunked
Many people struggling with debt are wary of filing for bankruptcy due to myths about what the process is like and how it will affect them. If you are at the end of your financial rope and are considering filing for bankruptcy, it’s important to get all the facts from a Texas bankruptcy lawyer.
Filing for Bankruptcy
Those thinking of filing for bankruptcy must first understand their options.
To file for Chapter 7 bankruptcy, you must complete a means test to determine your income and expense capabilities. If your income is deemed high enough to pay back creditors, you will not be allowed to file for Chapter 7 bankruptcy and must instead file for Chapter 13 bankruptcy.
In a Chapter 13 bankruptcy, you are allowed to keep valuable assets like your house or vehicle and pay back creditors over time through a payment plan. Usually, most of our Chapter 13 clients pay back very little, if any, of the unsecured debt as well.
Before filing for bankruptcy, it is important to understand what bankruptcy can and cannot do for you. The following are common bankruptcy myths:
- I will lose everything by filing for bankruptcy: When you file for bankruptcy, you will not lose everything you have. Though laws vary from state to state, there are exemptions that may help you keep your home, car (depending on its value), goods and clothing.
- Bankruptcy will destroy my credit: Though it is true that your credit will be negatively affected by filing for bankruptcy, it is also true that you will be able to get credit again, though it may be more difficult to obtain a higher interest rate. Bankruptcy remains on your credit report for up to ten years. After that, new creditors will not see it.
- Everyone will know about it if I file bankruptcy: While it is a public record, bankruptcy no longer appears in the newspaper and has not for many years.
- Bankruptcy is going to damage my parent’s/friend’s credit: This is simply not true. The bankruptcy is tied to your social security number. If your parent/friend does not file bankruptcy then it will not show up on their credit report that they filed. They simply didn’t file.
If you are considering filing for Chapter 7 or Chapter 13 bankruptcy, contact an experienced bankruptcy attorney to learn more about your options.