Debunking common myths about bankruptcy
There are a lot of myths about bankruptcy that simply aren’t true. In this post, we’ll focus on debunking a few of them.
When many people hear the word “bankruptcy,” they are prone to make inaccurate assumptions about this financial decision based on the negative stigma surrounding it. However, any bankruptcy attorney will tell you that the horror stories you've heard aren't necessarily grounded in reality. In other words, there are a lot of myths about bankruptcy that simply aren't true. In this post, we'll focus on debunking a few of them:
Everyone will find out – While any court document you file is public record, people cannot simply Google search your name and discover the filing. In most cases, the only people who will ever know about a bankruptcy filing are an individual's creditors and anyone that he or she decides to tell.
I'll lose all my valuable possessions – Nobody wants to risk losing their house, car and other important belongings. Fortunately, bankruptcy is designed to give people a fresh start, which means that the laws surrounding it enable them to protect most of – if not all – their assets. For example, under the federal exemptions (available to MN filers), you have $12,250 of protections available just for your household goods (furniture, home electronics, clothing, etc.). You also have automobile exemptions, homestead exemptions, life insurance exemptions and others. Depending on the amount of equity in your home, you can also have another $12,725 per spouse as wildcard exemption. The exemptions are quite generous because the format of bankruptcy is not to punish filers, but to help them get back on their feet and provide for themselves, their family and their community. If you have a mortgage and auto loans, you have to continue to make payments on them, as you did before filing, in order to keep the assets.
My credit will be permanently ruined – While it's true that bankruptcy does affect one's credit score for the month the case is filed and remains on a credit report for up to 10 years, most people are able to rebuild quickly and obtain good credit within one to three years of when they file. What many people don't realize is because of the court order issued automatically upon filing, your creditors must stop their reporting of negative information, such as late payments, to the credit bureaus. This means that upon filing, the credit score bleeding stops – the idea being that if you make timely payments on the debts you keep (mortgage, car loan, student loans) that positive reporting will rebuild your credit score. This is so even despite the bankruptcy filing being listed in the public records section of your credit report.
At Atlas Law Firm, we can help you determine the cost of filing for bankruptcy and answer any additional questions you may have. We offer free, confidential discussions and allow our clients to enroll in payment plans that can help them better afford the cost of our essential service.