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5 Common Bankruptcy Myths

5 Common Bankruptcy Myths

5 Common Bankruptcy Myths

There are many misconceptions surrounding individuals filing bankruptcy.  We address some of these bankruptcy myths and tell you the truth surrounding the process.

Myth #1: If I file bankruptcy, I will have to give up my house.

Truth: There are many ways to go through the bankruptcy process while still keeping your house.  In Chapter 7 bankruptcy, there are what are called “exemptions,” which allow you to protect certain assets from your bankruptcy creditors.  Depending on how long you’ve lived in Virginia, how old you are, and your military status, there are many types of exemptions you may be eligible to claim.  It is important to consult with a knowledgeable Virginia bankruptcy attorney, who will be able to assist you in claiming the correct exemptions to protect your property in your Chapter 7 bankruptcy.  And if you aren’t able to protect your house in a Chapter 7 bankruptcy, you may be able to file a Chapter 13 and keep your house. It is important to look at all of your options to see what is best for your situation.

Myth #2: I make too much money to file for bankruptcy.

Truth: Bankruptcy can be helpful for people of all income levels.  The various chapters of bankruptcy are designed to provide debt relief from people struggling with paying their debts.  Many people are surprised to find out that they qualify for a Chapter 7 bankruptcy despite what many consider to be a high income.  Various factors, such as your household size, expenses, and types of debts will all go into the determination of whether you qualify for a Chapter 7 bankruptcy.  And even if you make too much to qualify for a Chapter 7, a Chapter 13 may be a good option to help you reorganize your debt. A Virginia bankruptcy attorney can advise you on which chapter you may qualify for and what will best help you get your debt under control.

Myth #3: If I file for bankruptcy, I won’t be able to take on any new debts for 10 years.

Truth: Many people are able to qualify for a mortgage just 3-4 years after filing for bankruptcy.  If you file a Chapter 7 bankruptcy, it will stay on your credit report for up to 10 years, but that doesn’t mean you will get automatically get denied for a mortgage, car loan, or other type of credit.  There are many things you can do to work on rebuilding your credit after filing bankruptcy in order to get to a place where you can qualify for financing of a house or car. Consulting with a Virginia bankruptcy attorney will allow you to learn of the best ways to rebuild your credit following your bankruptcy filing.

Myth #4: I don’t have enough debt to file for bankruptcy.

Truth: There is no minimum debt amount for someone to be eligible to file bankruptcy.  If your debt is too much for you to manage, even if not seen as a large amount by many, you could benefit from filing bankruptcy.  We have seen situations where bankruptcy is beneficial to someone with debt anywhere from $4,000 to hundreds of thousands of dollars.  It is all based on your particular financial situation.

Myth #5: Chapter 13 bankruptcy is the same as consolidating my debts.

Truth: When you consolidate your debts through a consolidation loan, you are required to pay back the entire amount, plus interest.  Depending on your situation, in a Chapter 13 bankruptcy you may only be required to pay back a very small percentage of your debts. Provided you make all your payments to the bankruptcy trustee, the remainder of your debts would then be discharged, or wiped away.  The amount you pay in a Chapter 13 bankruptcy is determined by the amount and type of your debts, your assets, and your income and expenses. It is important to have a Virginia bankruptcy attorney guide you through the process so that you are able to arrive at a payment that both works for your budget and complies with the applicable law.

Our Attorneys Can Help

 If you are struggling with your debt, call the Ernest Law Group today to schedule a consultation with a bankruptcy attorney. Our experienced lawyers can help identify the best course of action, and guide you through every step of the process.

 Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer. For specific technical or legal advice on the information provided and related topics, please contact the author, Heather Silkstone.

 

 

 

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