Nobody wants to be the one who has to file for bankruptcy, still, filings are actually fairly common. Last year 884,956 Americans filed bankruptcy, yet, just like many unpleasant and scary procedures, the reputation of bankruptcy is based on a few tidbits of truth coupled with a lot of embellishment.
Filing for Chapter 7 or Chapter 13 bankruptcy is not always simple or pleasant. It is rather easy to get tangled up in the hoops that must be jumped through to get this debt relief option. Deceptions about filing bankruptcy are rife, from the people who file to the implications for those who proceed. However, bankruptcy is not even nearly as frightening once you understand it, and to make the bankruptcy Colorado process a little easier to understand, here are 5 bankruptcy myths dispelled:
Myth 1: You’ll Lose Everything
People usually think filing for bankruptcy means giving up their cars, houses, and any other asset they have. However, they are likely to keep a lot of their possessions. The big majority of Chapter 7 cases are no-asset cases, which means the debtor gives up no possessions, as you can carve out a few basic assets that are necessary for routine life as exemptions. However, assets that can be exempted vary from state to state, so ensure to discuss the exemptions with your bankruptcy lawyers. In Chapter 13, debtors get to keep all the assets, but their value figures in the repayment plan.
Myth 2: All Your Debt will be Relieved
Both Chapter 7 and Chapter 13 will offer relief from most forms of debt, but there are a few exceptions. As an empirical rule, in bankruptcy cases, you cannot discharge debt that you are personally deemed responsible for. These include taxes, family or child support, and debt that are a result of fraud. Student loans are another kind of debt that is unlikely to be forgiven. Normally, you can discharge debt from credit cards, personal loans, medical bills, and more. Your bankruptcy lawyer will help you understand which debt will be affected in which way.
Myth 3: Paying Off Debt is a Better Option
Filing bankruptcy is probably one of the most serious financial decisions one can make, but that does not mean it is a bad idea. In fact, filing bankruptcy may be the best choice for you. Bankruptcy might not be a panacea for every situation, and if you are contemplating to do it, you should consult your bankruptcy lawyers first. However, there will be a downside hit on your credit score, but that will be soon overweighed by the relief of stress and getting the problem solved. If your debt is more than 50% of your annual income and it seems impossible to pay them within 5 years, bankruptcy is the answer for you to live debt-free.
Now that you have knowledge of what will and what won’t happen in the bankruptcy process, you are prepared to explore options with a bankruptcy Colorado attorney and put yourself in a position to file successfully.