Most people are often extremely afraid of filing for bankruptcy. Though it is not always a bad thing, it should be taken as a serious step which has certain consequences. This being said, a majority of the horrible predictions you hear regarding the ‘tragedy’ of filing for bankruptcy, or the unavoidable complications you will face, do not actually materialize.
Here are the three most common bankruptcy fears:
- You will never be eligible for a mortgage again
Certainly, you will be able to obtain a car loan, buy a house or have a credit card again. In fact, most applicant’s credit improves once they file for bankruptcy. Most of bankruptcy filers already have low credit-worthiness since their creditors consistently report on their finances or obtain judgments. However, all debts are discharged when an individual files for bankruptcy. Filing for bankruptcy also means that no delayed payments are being reported.
- You will lose your property
A very small percent of bankruptcy cases (nearly 2%) require individual debtors to turn over their properties to a bankruptcy trustee. On the contrary, the property and real estate equity of most filers will be exempt from turnover. In fact, the Bankruptcy Code permits a person to retain most, if not all of his/her assets, depending upon the exemption scheme being practiced in the specific State. Also, a qualified bankruptcy lawyer can help small debtors whose property exceeds the allowed exemptions to convert the non-exempt assets (such as cash) into exempt assets (such as retirement savings).
- You will face humiliation
Many people are downright terrified of filing for bankruptcy due to the fear of humiliation or their belief that they have failed in some way. In fact, for many, the stress of dealing with creditors pales in comparison to the chance that someone who knows them will find out about their bankruptcy case. However, your friends and neighbors are unlikely to find out about your bankruptcy case unless they habitually check court files. Filing for bankruptcy can considerably ease your financial situation and help you become stable again. Otherwise, you would be continuously harassed by creditors wanting their money back.