The term “bankruptcy” brings fear to many. But are the fears warranted or unfounded?
There are many misconceptions about the process of filing bankruptcy, says attorney Richard A. Roberts of the law office of Richard A. Roberts, Esq. The top three are: "1) You will never be able to obtain credit again, 2) Credit ratings can't improve or it will take an inordinate amount of time to do so; and 3) All bankruptcies are the same," he explains.
And while many people think that all of their debts are wiped out in Chapter 7 bankruptcy, it’s just not true. There are certain types of debts that cannot by law be discharged, or erased, including child support and alimony, student loans, restitution for a criminal act and debts incurred as the result of fraud.
So should you file when you are finding it hard to pay your bills? Maybe. There are some pluses for filing for bankruptcy. According to Roberts, "Depending upon the chapter of the Bankruptcy Code you file under bankruptcy it can: a) allow you a fresh start, b) stop wages from being garnished, c) stop bank accounts from being seized; d) stop foreclosure on your home; and/or e) stop many lawsuits."
Some also believe that by filing they will lose everything they have acquired. Also, not true. Most people who file bankruptcy keep everything they have. Check the bankruptcy laws of your hometown; they vary from state to state. Every state has exemptions that protect certain kinds of assets, such as your house, your car (up to a certain value), money in approved retirement plans, household goods and clothing.
It is a good idea to consult a profession when considering filing for bankruptcy. "See a good attorney who practices bankruptcy law. Then assess your debts and your ability to pay them," advises Roberts.
Remember, filing is not an easy process and it is one that will stay with you a while--it will remain on your credit report for 10 years.