A negative stigma often surrounds the notion of filing for bankruptcy. Many people attribute it to a personal failing of some sort, but that often isn’t the case. In general, you may simply have a misunderstanding of what bankruptcy can do for you.
Here are three common misconceptions about filing for Chapter 7 bankruptcy.
1. You will lose all your possessions
Many people fear that they will lose their homes or cars when they file Chapter 7. However, filing for bankruptcy does not automatically mean you will lose everything you own. The Florida bankruptcy system has stipulations in place that can help you keep important, day-to-day items.
Exemptions protect certain possessions from being taken from you during the bankruptcy process. While there are several requirements you must meet to qualify for exemptions, they exist to help you through your bankruptcy process.
2. Bankruptcy will completely clear your debts
While filing for bankruptcy may be the best option for you to clear your debts, it doesn’t take care of all of them. Substantial medical bills, personal loans and credit card debt are most commonly discharged through Chapter 7 bankruptcy.
However, student loans and court-ordered payments like taxes or child support are not covered when you file for Chapter 7 bankruptcy. Consulting with a bankruptcy attorney may help you understand what to expect from your personal case.
3. You will have poor credit
There are some setbacks to filing for Chapter 7 bankruptcy. After you file, your bankruptcy will appear on your credit report for 10 years. You may also see a drop in your credit score and have limited access to your credit. But don’t let these consequences scare you.
Just because you file for bankruptcy doesn’t mean you won’t be able to make purchases or payments. You can apply for a secured credit card to help build your credit after filing for bankruptcy. Knowing how bankruptcy can affect your credit can help you plan effectively and prepare yourself financially for the years to come.
Understanding what bankruptcy really entails can help you decide if it’s the right option for you. And although filing for bankruptcy can be stressful, Chapter 7 bankruptcy offers you the opportunity to seek a fresh financial start.