We get it — the word ‘bankruptcy’ can sound a little scary when you don’t know exactly what it means. But the fact is, declaring bankruptcy can actually give you peace of mind and financial relief under the right circumstances. Let’s debunk some of the most common myths about bankruptcy so that you can think clearly and focus on the facts:
MYTH: Declaring bankruptcy means you lose everything.
This is a common misconception about what declaring bankruptcy truly entails. In most cases, you can keep your material belongings, even your home and your car.
“The vast majority of Chapter 7 cases are no-asset cases, meaning the debtor gives up no possessions. There are two reasons for this. First, you can carve out some basic assets, called exemptions, that are necessary for day-to-day life…And for your possessions that aren’t covered under exemptions? Well, the creditors likely don’t want them,” writes Sean Pyles on Nerdwallet.
Texas specifically has very debtor-friendly exemption laws that allow most debtors to keep all of their assets. This applies to both Chapter 7 and Chapter 13 cases.
MYTH: It’s better to stay in debt than to declare bankruptcy.
This is another myth people commonly hear about bankruptcy when they’ve reached a level of debt that they’re not sure they can handle. Filing for any type of bankruptcy is certainly a big decision that shouldn’t be taken lightly. That being said, it’s often the best decision for those who would otherwise become unable to ever pay off their debt and need to find debt relief. In any case, the only way to determine the best action to take is to talk to a bankruptcy lawyer.
Surprising to most people, many of our clients at Acker Warren report to us that their credit score improves within a few months of filing bankruptcy. The theory behind why this occurs is the creditors must remove themselves from your credit report at discharge. Many creditors will remove themselves prior to discharge. The combination of the removal of negative reporting, and the improvement of your debt-to-income ratio, makes your credit score improve.
MYTH: The sole act of filing for bankruptcy is also expensive and will add to my debt.
Finally, this myth is entirely false. In fact, in Texas, Chapter 13 filing often costs less than $500 to begin a case. There are some complex financial situations that require a higher upfront cost to complete the filing process, but most average cases are manageable to finance. Plus, the debt relief and peace of mind you’ll gain is absolutely priceless.
Further, Chapter 7 bankruptcy can eliminate all of your unsecured debt, except for student loans. The typical Chapter 7 case is very low cost. From a financial standpoint, filing bankruptcy often saves debtors from being burdened by tens of thousands of dollars in debt, if not more.
Now that you’re aware of some of the real facts about bankruptcy, you can consult a low cost bankruptcy attorney to get the financial advice you need. For more information about bankruptcy lawyers, contact Acker Warren.