Common Myths about Consumer Bankruptcy

November 05, 2013  |   Posted by :   |   Blog   |   0 Comment»

gavelLike most complicated legal situations, bankruptcy is surrounded by lots of misinformation. When considering bankruptcy, it is important to do your research and consult the most experienced New Orleans bankruptcy lawyers to determine if it is the right solution for your financial situation. Read on to learn about some of the most common myths surrounding consumer bankruptcy.

Only Financially Irresponsible People File for Bankruptcy

The idea that only financially irresponsible people file for bankruptcy is a myth. While some individuals who file for bankruptcy may have trouble with overspending, most people file because they are dealing with serious personal problems like unemployment, medical problems, or a divorce. Long-term unemployment, overwhelming medical bills, and the high cost of divorce has forced many of the most financially responsible Americans into bankruptcy.

Filing for Bankruptcy Will Discharge All Past Debts

The idea that bankruptcy will discharge all past debts is a myth. Although filing for Chapter 7 bankruptcy provides the debtor with a discharge of many eligible debts, there are several types of debt that are considered non-dischargeable. Some of the most common types of non-dischargeable debt include alimony and child support obligations, fines or restitutions associated with a crime, DUI fines, student loans, most federal, state, and local taxes, and any type of fraudulent debt.

Bankruptcy Will Permanently Ruin Your Credit

The idea that bankruptcy will permanently ruin your credit is also a myth. Most individuals that file for bankruptcy already have a poor credit rating due to extreme financial problems. Although a bankruptcy filing will appear on the debtors credit report for 7 to 10 years, it can also stabilize the debtor’s credit by ending the negative cycle of late payments and collection attempts. Individuals that file for bankruptcy can quickly rebuild their credit by paying bills on time and obtaining a secured credit card.

I Will Lose All of My Personal Property If I File for Bankruptcy

The idea that individuals who file for bankruptcy will lose all of their personal property is a myth. Most individuals that file for Chapter 7 or Chapter 13 bankruptcy are allowed to keep a certain amount of personal property due to the homestead exemption. The Homestead exemption allows the debtor to exempt certain assets from the bankruptcy petition in order to make a fresh start. Some of the most common bankruptcy exemptions include a home, car, retirement savings, necessary clothing, and household goods.

It Is Too Hard to Qualify for Bankruptcy Protection

The idea that it is too hard to qualify for bankruptcy protection is also a myth. After the federal government revised the bankruptcy law in 2005, many individuals have feared that they would not qualify under the new restrictions. The changes made to the bankruptcy law were meant to reduce the amount of fraudulent claims and do not affect the honest debtor in need of relief. If you are considering bankruptcy, it is important to consult qualified and experienced New Orleans bankruptcy lawyersto evaluate your financial situation and determine the best course of action for your specific needs.

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