Have You Been Misled By These Bankruptcy Rumors?
Posted on: 14 May 2020
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If you are so behind on your bills that you are being harassed by creditors and in danger of losing property, you may need to consider chapter 7 bankruptcy. It seems that everyone has an opinion about bankruptcy, and few of the people who let you know it are experts in bankruptcy law. It would be a pity if you let the following false rumors about bankruptcy stop you from getting the debt relief and financial fresh start you need. Read on and find out more.
If you declare bankruptcy, your ability to get credit will be destroyed.
Bankruptcy is not the only factor used in determining your credit worthiness. Your bankruptcy, once it's complete, will warrant a single notation of a federal filing in bankruptcy court. On the other hand, your credit score is based on many other factors. You are very likely to be offered a credit card after you file. Use care when choosing a card and pay the balance on time each month. You will slowly begin to build new credit. Be patient and use credit wisely. The chapter 7 bankruptcy notation automatically disappears at the 10-year mark.
Chapter 7 bankruptcy means you'll lose your home.
Homeowners usually don't have to worry about losing their home as long as certain factors are considered. The biggest of those is being current on mortgage payments. Once you file for bankruptcy, any foreclosure activities are frozen for several months. If you are behind on your payments, however, foreclosure can resume after that time period and you could lose your home to the lender. As far as losing it to the bankruptcy court, that depends on how much equity you have in the home and what your state exemptions are. The bankruptcy trustee may be interested in homes that have a lot of equity (paid off or nearly paid off). Some states have generous homestead exemptions and some don't. The amount of your exemption can make or break the deal.
Your vehicles will be seized by the trustee.
Dealing with personal property like a car or truck is similar to the way bankruptcy deals with a home. As long as you are not behind on the payments and being threatened with repossession, your ability to keep the car is based on your state's exemptions. In most cases, exemptions apply to only a single vehicle (or two if you are filing jointly). Also, it might help if your state offers so-called "wildcard" exemptions that can be applied to any property you want.
Your retirement account may be eliminated.
This rumor only applies if you removed cash from the account. As long as the funds in your 401(k) are intact, it's protected by law from bankruptcy seizure. Federal law protects only certain types of retirement accounts, though, so speak to your bankruptcy lawyer to find out more about what could happen to your account.