Bankruptcy Basics: Facts To Consider Before Filing

When it comes to beneficial things with bad reputations, few things can hold a candle to bankruptcy. Bankruptcy can be a true saving grace for people who have found themselves in an overwhelming financial position. Unfortunately, there are a lot of misconceptions out there about the bankruptcy process as well as its aftermath. These misconceptions often push people away when bankruptcy could truly benefit them. Here's a look at a few things that you should understand about bankruptcy, especially if your financial situation has become challenging.

Bankruptcy Won't Destroy Your Credit

You might have heard that you should never file for bankruptcy because it will permanently destroy your credit and you'll never be able to get credit again in the future. The truth is that filing for bankruptcy will do far less damage to your credit score for a shorter period of time than you'd experience from missing payments, facing repossessions, and dealing with similar issues that may come from being financially overextended.

The effect on your credit score, particularly the cumulative effect when you have multiple accounts go into default, can be devastating and can take you many years to recover from. When you file for bankruptcy, this is eliminated. Your credit report will reflect the bankruptcy but, once that's discharged, you can start rebuilding credit immediately. And, since you can't file bankruptcy again for several years, you're not seen as such a credit risk after the fact. Secured credit cards and similar accounts are a great way to start rebuilding and properly managing your credit.

Your Income Won't Prevent You From Filing For Bankruptcy

You might think that you can't file for bankruptcy because you make too much money. The truth is that, even with a higher income, bankruptcy can still be an option. If you make too much and fail the means test for Chapter 7 bankruptcy, you can still consider Chapter 13 and just restructure your debts, create a payment plan, and settle those accounts. Either one will help you to resolve your financial situation. 

You Don't Have To Lose Everything To File For Bankruptcy

You may have heard that filing for bankruptcy means you'll lose everything that you have. That's not necessarily the case. Both forms of bankruptcy have allowances for certain assets to be protected and not liquidated as part of the bankruptcy settlement. And Chapter 13 allows you to retain even more of your assets if you include them in the repayment plan. Before assuming that you'll have to give up everything, talk with a bankruptcy law attorney for more information.

These are some of the things that your bankruptcy attorney wants you to understand before you dismiss the possibility of filing. If you think bankruptcy could help you, talk with a bankruptcy lawyer near you today.