The decision to declare bankruptcy is primarily an emotional one. One of the reasons so many people get stressed out about the decision to file for bankruptcy is because they believe in several bankruptcy myths. While undergoing bankruptcy always has some impact on your financial future, the first step involves understanding the top four myths about bankruptcy.
Myth #1: You’ll Lose Your Home
It is possible to lose your home when you file for bankruptcy, but it is not a guaranteed outcome. The options to keep your home depend upon what type of bankruptcy you file for.
Keeping Your Home Under Chapter 7 Bankruptcy
If you are filing for Chapter 7 bankruptcy, the bankruptcy trustee may want to sell the house to pay off your debts. However, if you are current on your mortgage payments, you may be able to avoid having to sell your home. Also, having an asset protection lawyer on your side can boost your chances of keeping your home when filing Chapter 7.
Keeping Your Home Under Chapter 13 Bankruptcy
Chapter 13 bankruptcy allows you to delay a foreclosure. In some cases, you might even be able to prevent foreclosures from happening. Filing for Chapter 13 allows you to get up to date on your payments so that you can keep your home.
Getting a Homestead Exemption
You can also apply for a homestead exemption. While this move will not always allow you to keep your home, you will still be entitled to keep a certain percentage of your home’s equity after it is sold. That amount will be yours to keep and cannot be used to keep creditors happy.
Myth #2: You’ll Lose Your Property
People are often hesitant about filing for bankruptcy due to the fear they might lose all their property. The goal of bankruptcy is to help you start over and create a new financial future where you will better handle your debts. Getting rid of all of your assets and property will not allow you to do that. For this reason, you will be able to keep much of your belongings when you file for bankruptcy.
Federal personal property exemptions can allow you to keep up to $13,400 worth of items. These can include some or all of the following:
You can also apply for other exemptions. An experienced asset protection attorney can help you determine which exemptions you qualify for, but the most common exemptions include:
- Child support and alimony
- Personal injury lawsuits
- Retirement accounts.
Myth #3: You Will Lose Your Ability to Qualify for Credit
Many people have a concern after they file for bankruptcy because the filing will ruin their credit score, and they will never be able to get a loan or credit card again. This one is an understandable concern since the ability to have credit in your name can limit your access to cars, apartments, and mortgages. But the reality is that bankruptcy allows you to rebuild your credit.
Myth #4: You Should Handle Bankruptcy Alone
While a lawyer is not required to file for bankruptcy, the best way to protect your assets is to hire an experienced attorney to assist you with the process. A bankruptcy attorney who has experience with asset protection is the best choice for making sure that you will keep as much of your property as possible during the bankruptcy proceedings.