The Internet is full of stories and inaccurate information about bankruptcy. All of that information combines to create a sort of mythology, making bankruptcy sound both scarier and a lot easier than it actually is. Today, we're looking at two of the most common bankruptcy myths.
The first myth is that you lose everything when you file bankruptcy. Some information and people will tell you that you'll give up your home, your cars and all your personal belongings just to pay creditors. You'll start from scratch, with nothing, says this myth. It simply isn't true.
What property you let go in a bankruptcy depends on the type of bankruptcy you file, your debt level, your income level and the type of property you have. That being said, many people keep their homes and cars when they file bankruptcy. In fact, bankruptcy can be a tool that lets you keep your home when you would otherwise lose it to foreclosure. To understand how bankruptcy might impact your personal property, speak to a lawyer.
A second myth is that bankruptcy wipes all your debt clean. How much debt relief you receive in bankruptcy depends on whether you file Chapter 7 or 13, how much debt and income you have when you file and what type of debt you have. If you file Chapter 13, you'll pay some portion of your income to the bankruptcy trust for three to five years. That money goes toward paying your debts. If you file Chapter 7 and reaffirm any debts, then you still pay those debts. Some debts, such as tax debts, are not dischargeable in bankruptcy.
Instead of relying on outdated or factually incorrect information online, make your decision about bankruptcy after you speak to a qualified lawyer. You might have options you haven't even considered.
Source: Nerd Wallet, "5 Bankruptcy Myths Dispelled," Sean Pyles, accessed July 01, 2016