The decision to file for bankruptcy can be scary, and one of the main concerns people have is that they will lose everything they own. Media portrayals and common misconceptions about bankruptcy usually fuel this fear. However, the reality is much different.
1. Bankruptcy Exemptions Protect Your Assets.
When you file for bankruptcy, you must list all your assets (e.g. house, car, jewelry, etc.). However, not all assets are created equal. Many states have exemptions protecting specific types of assets, such as a portion of your home equity or personal property. Sometimes, even if an asset isn’t fully exempt, you can negotiate a deal with the trustee to keep it. Working with an experienced bankruptcy attorney to maximize your exemption options and protect your assets is essential.
2. Not All Debts Are Discharged in Bankruptcy.
Contrary to popular belief, not all debts are eliminated in bankruptcy. Some debts, such as student loans, tax debts, and domestic support obligations, are considered non-dischargeable. You may also be required to pay some debts in full, such as secured debts (e.g. car loans). Knowing which debts can be discharged is crucial in determining what assets you need to keep to pay off those debts.
3. Chapter 13 Bankruptcy Allows You to Keep Most of Your Assets.
Chapter 13 bankruptcy involves repaying a portion of your debts over some time through a court-approved payment plan. With this type of bankruptcy, you can usually keep most of your assets, including your house and car, as long as you continue to make payments on them. Chapter 13 bankruptcy is an excellent option for individuals with a regular income but struggling with debt.
4. Bankruptcy Doesn’t Have to Ruin Your Credit Forever.
While filing for bankruptcy will impact your credit score, it doesn’t mean you’ll never be able to borrow money again. Most individuals can rebuild their credit by paying bills on time and establishing good financial habits. Some people see an improvement in their credit score after filing for bankruptcy because their debt-to-income ratio decreases. Getting a secured credit card or a small loan shortly after your bankruptcy discharge is also possible to begin rebuilding your credit.
5. Bankruptcy Can Provide a Fresh Start.
One of the benefits of filing for bankruptcy is that it gives you a fresh start. You can regain financial stability and move forward with your life by eliminating or reducing your debts. Bankruptcy can also stop harassing phone calls and wage garnishments, relieving you from creditor pressure. While it’s not an easy decision, bankruptcy can be a valuable tool for those who need to hit the reset button on their finances.
Top-Rated Los Angeles Bankruptcy Attorneys
Bankruptcy does not mean losing everything. By dispelling the myth and equipping yourself with accurate information, you can confidently approach bankruptcy and take advantage of the opportunities it offers for a fresh financial start. Remember, RHM LAW LLP is here to provide expert guidance and support throughout your bankruptcy journey. For a free consultation, contact us today at (213) 344-0043.