Filing bankruptcy ruins your credit … you’ll never be able to get a credit card or loan again … and your possessions will all be taken.
Or: your debts will all fly away, your home will be safe no matter how far behind on payments you are, and your credit will improve.
With some creativity, you likely could come up with your own common “myths” of bankruptcy. But there is nothing wrong with mistaking the benefits and negatives of filing bankruptcy. These are all common online.
This posts shows you 6 myths you no longer need to believe. Some you may know, but read on, because some may surprise you.
1-You’ll Lose Everything
In most Chapter 7 bankruptcy cases, actually over 90 percent, you lose absolutely no assets. And the point of Chapter 13 bankruptcy is that you pay over an extended period so you lose nothing. The myth is that you 1) will lose your home and car and 2) you won’t be able to get them back. In fact, if you work with a trustee in the rare case you might lose something, you can negotiate to keep items such as your car. With Chapter 13, you can put an automatic stay on your home and stop any foreclosure proceedings if you are not too far behind.
2-You’ll Eliminate All Debt
Taxes, alimony, and child support cannot be eliminated. And with Chapter 13 bankruptcy, you are paying back everything, just typically over an extended period of time. Chapter 7 bankruptcy can eliminate credit, medical, and mortgage debt.
3-You won’t have to pay on your house
You still have to stay current on your home in order for the bankruptcy to work out. For instance, if you file Chapter 7, you can eliminate that debt, but you’ll lose the house. With Chapter 13, you must stay current on the mortgage or you’ll lose it.
4-Credit cards will no longer be an option
Let’s get back to the positives. Bankruptcy will stay on your credit report for, in most cases, 10 years. However, you will still get many offers for credit cards and you will have the opportunity to rebuild your credit. The interest rates on the credit cards may be high, but if you stay up on them it can be beneficial in rebuilding your credit.
5-Filing Bankruptcy Will Improve Credit Scores
Just because you eliminate debts with bankruptcy does not mean you get a clean slate. As noted above, a bankruptcy will show up on your credit report for 10 years. It’s not going to ruin you, but it certainly won’t improve your credit.
6-You won’t be able to make large purchases
You can still make purchases. Just because you file bankruptcy does not mean all options are off the table. You can still get credit cards, loans, and buy properties. You may have to work on rebuilding your credit, but if everyone who filed bankruptcy could never make a large purchase again there would be far less car and home owners.