While filing for bankruptcy means that you are in a difficult financial situation, there is a lot of misinformation surrounding the entire process. As a result, many people are hesitant to file for bankruptcy even when it is in their best interests since they are not aware of how it all works.
Below are some widespread misunderstandings about bankruptcy that you need to know before declaring bankruptcy.
You will lose everything
Filing for bankruptcy does not mean that you will be left with nothing to your name. It is possible to exempt property such as your car or home from being sold by the bankruptcy trustee. It means that these assets will be protected from being sold to repay your debts. However, it is important to note that these exemptions are limited to a certain value.
You will never get credit again
Your credit rating will be affected after you declare bankruptcy, but it does not mean that you will never access credit. It is possible to get loans even after filing for bankruptcy, but it may come at a steep cost since you are considered a high-risk borrower.
However, it is possible to rebuild your credit rating over time, given that bankruptcy gives you a clean slate to start over afresh.
All your debts will be discharged
Many assume that all their debts will be taken care of after filing for bankruptcy. The truth is that not all debts will be discharged by bankruptcy, and you may still have some financial obligations to meet, such as any student loan or child support payments.
The bottom line
Having the correct information before filing for bankruptcy is very important. It will help you ascertain your financial position at the end of it all and help you plan for life ahead.
Therefore, it is advisable to learn more about how everything works to prepare yourself financially and mentally beforehand.