Bankruptcy is one of those experiences in life that sounds horrible. Even the word “bankruptcy” has a final, ominous sound to it, like a door closing in your face. Because people’s entire financial lives are geared toward avoiding bankruptcy, most people don’t know what bankruptcy actually entails. As a result, many scary myths have cropped up around it—from thinking you’ll lose everything to feeling that your bankruptcy will haunt you forever.
Let’s shatter three myths about bankruptcy that may prevent you from rationally considering it as an option in case you’re in financial difficulties.
I’m going to lose everything—including my home and my car.
Bankruptcy is designed to help you eliminate or pay off your debts while still keeping essential items like your home and your car. During the bankruptcy process, exemptions can protect certain property such as your house and your car from liquidation. Other exemptions usually include household belongings like furniture and clothing..
For example, Georgia allows exemptions of up to $21,500 (or $43,000 if you’re married) for your home or for other property that falls under the state’s homestead exemption law along with up to $5,000 for your car. That, combined with a “wildcard exemption” of up to $11,200 per person, may be enough to keep your home or car. Other exemptions protect assets such as pensions, retirement accounts, tools of the trade, and some essential personal belongings (up to $5,000).
My credit will be ruined forever.
Yes, a bankruptcy is one of the worst things to happen to your credit. But it doesn’t ruin your credit forever. You will need to work hard to reestablish good credit but it’s not impossible. A bankruptcy stays on your credit report for 10 years, and so you will go through a rough period when it will be harder to get credit. Yet, options and alternatives always exist.
- You may have to use credit cards with higher interest and make sure you pay them off on time.
- You may have to accept higher interest rates when buying a house or a car.
- You may need people to co-sign documents or find creative ways to financially assure someone that you can make payments.
Also, think about it. How was your credit before you filed for bankruptcy? Probably pretty bad, right? Strangely, bankruptcy ultimately helps your credit in the long-term by getting you back on track.
My reputation will be damaged.
You are not required by law to wear a BANKRUPTCY sign around your neck and the media will not report that you filed for bankruptcy (unless you are a celebrity or notable figure). Other than your creditors, your attorney, and some close friends and family members if you tell them, no one will know about your bankruptcy. Financial credit checks may present some obstacles, but you won’t be discriminated against for jobs or prevented from taking on roles within your community.
Ultimately, a bankruptcy serves as a harsh but necessary process to get your finances back on track. You may liquidate some assets to pay off creditors, discharge some debts, and get a fresh start. It will take time and patience to rebuild your financial credit and stabilize once again, but your life is not over or ruined.
The United States government recommends that all people filing for bankruptcy use an attorney to help with legal details and to make sure you follow the law. Call us today for a free consultation about your bankruptcy.