Bankruptcy Lawyer Bryan W. Stone answers the question: “What are the pros and cons of bankruptcy?”
A recent article by Money Magazine walked through some of the most common myths associated with the bankruptcy process, exposing them as the fictions they really are. Though deciding to file bankruptcy can be difficult under the best of circumstances, it’s made unnecessarily harder due to commonly held misconceptions. These myths can intimidate and frighten people away from a process that might actually prove helpful, freeing them from mountains of burdensome debt. Now, let’s demystify some of these myths.
One commonly held belief about bankruptcy is that it will result in losing everything. For some reason, people are under the impression that once you file, the court comes and takes anything of value to be sold and used to pay back creditors. This is thankfully not at all true. The truth is that you will likely keep lots of your personal property after the bankruptcy is said and done. In fact, according to the experts interviewed by Money Magazine, the vast majority of Chapter 7 cases involve debtors who give up no possessions. How does this work? Debtors are able to exempt much of their property under bankruptcy laws. Even if certain property isn’t covered, creditors usually aren’t interested, at least in most things. If you have exceptionally valuable jewelry, art work or expensive vehicles (without loans), then those might catch the eye of your bankruptcy trustee. If not, it usually isn’t worth the time and energy confiscating and selling old furniture or used dishes.
Another myth that must be debunked is that bankruptcy can solve all of your financial problems by wiping away all of your debts. Though bankruptcy is obviously used to eliminate debt, it is crucial to understand that bankruptcy cannot be used to eliminate all debt. In fact, the bankruptcy system includes several notable exceptions for debts that cannot be discharged. Examples include student loan debts (in most cases), child support, alimony, back taxes and debts owed due to fraud on your part. If you primarily have non-dischargeable debts, it may not be worthwhile to file for bankruptcy as you would be left with much of the same debts in the end. It’s for this reason that it is so important to discuss not only your levels of debt, but the type of debt you have when meeting with your bankruptcy attorney.
Another myth that can hold people back from considering bankruptcy is the idea that it will leave your financial future in tatters. Though it’s undeniable that filing for bankruptcy can be a blow to your credit report, it’s important to understand that this pain won’t last forever. Bankruptcies only remain on your credit history for between 7 and 10 years, after that, they fall away and your credit score is unharmed. Even before that things start to improve, with the bankruptcy receding further and further into the rearview mirror. A survey done by the Federal Reserve showed that the average credit score for bankruptcy filers in 2010 was 538 on Equifax’s scale (from 280 to 850). By the time the bankruptcies were finalized, about six or eight months later, the scores had already risen to an average of 620. This proves the point that the harm of a bankruptcy doesn’t last forever and shouldn’t be what prevents you from considering an option that might prove helpful
If you are contemplating bankruptcy in the Charlotte area, please call the skilled lawyers at Arnold & Smith, PLLC find additional resources here. As professionals who are experienced at handling all kinds of bankruptcy matters, our attorneys will provide you with legally sound advice for your particular situation.
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