Americans are experiencing debt stress like never before. Much of this stress stems from a higher cost of living and stagnant wages. Consumers are paying very high proportions of their income for housing. Many households also must manage vehicle loans, high insurance rates, student loans, and other financial stressors. Employment has also taken on a temporary nature in many industries. The result is high debt loads that often become unmanageable.
Bankruptcy provides households with the opportunity to bring their expenses down to a manageable level. Filing bankruptcy is a personal choice. It is not always the best solution for debt problems, but in many cases, it provides the only method for a household to regain solvency. If you are unable to keep up with mounting debts, understand that you have legal options under bankruptcy. These options release or restructure debts, allowing your household to afford the cost of living.
Many people put off bankruptcy because of several common bankruptcy myths. Putting off bankruptcy because of these myths is always a mistake. When considering bankruptcy, it’s important to have a clear understanding of what property you are entitled to keep, the effect on your credit history, and the process for rebuilding your credit afterward. Misconceptions about these aspects of bankruptcy should not affect your decision to get out of debt. Here are the facts to dispel these bankruptcy myths.
What property can you keep in bankruptcy?
Many people have the misconception that filing bankruptcy means they must surrender all of their possessions. This is completely false. No bankruptcy requires you to surrender the shirt off your back. You are allowed to keep some of your property. In some situations, you may keep all of your property.
The specifics depend on the debtor’s particular case and circumstances. To find out what property you are eligible to keep, it’s best to discuss your situation with a bankruptcy attorney. Here are several examples of property many bankruptcy petitioners are able to retain.
If you own a home, bankruptcy can help you stop foreclosure and keep the property. Your lender is barred from continuing a foreclosure while your bankruptcy case is active. During this time, the foreclosure process is essentially frozen. You have the opportunity to reaffirm the mortgage debt if you wish to keep the home. The decision to reaffirm should be based on what leaves you in the best financial position after bankruptcy.
It’s important to note that if you have home equity, the court could require you to sell the home. The proceeds would then be used to pay your creditors. Many states allow you to keep the home if equity is below a certain dollar amount. If you own a home, consult with a bankruptcy attorney before making a decision to file. You need to preserve your home equity if at all possible.
Vehicle loans can also be reaffirmed. Vehicles without notes can be kept but only up to a certain value. Obtaining a new car loan after bankruptcy discharge is usually possible if you have the means to afford the loan. A bankruptcy attorney can advise you on the benefits and drawbacks of reaffirming a vehicle loan.
Bankruptcy allows most people to keep their personal property. If you have especially valuable property, a court may order it sold to pay creditors; however, this would only apply to the specific valuable property. For example, a court may not allow you to keep the expensive art. The property you need for daily living will never be in danger. A bankruptcy attorney will interview you about what property you have and advise you if you can keep all of it, which is frequently the case.
Credit Score and Credit Repair
One of the most common misconceptions about bankruptcy is that your credit will be permanently damaged. Though credit scores sink after a bankruptcy filing, they usually rise after the conclusion of the case. Creditors consider you a better risk because you have discharged some or all debts.
Another of the most common misconceptions about bankruptcy is that credit repair will take many years. In truth, your credit starts to improve as soon as the bankruptcy case ends. After bankruptcy, you can rebuild your score by using debt sparingly and paying all bills on time.
If you need advice on bankruptcy, contact a bankruptcy attorney, who can dispel the most common misconceptions about bankruptcy and help you become debt free.