Fear holds many people back from filing for bankruptcy, even as creditors become more aggressive with their collection efforts and the bills continue to pile up. While filing bankruptcy is a serious decision, many fears that people have regarding bankruptcy are incorrect or exaggerated. The following are some common fears that hold people back from filing for bankruptcy.
Not Being Able to Get Credit
Many people worry that a bankruptcy filing will forever impair their ability to get a mortgage, a car loan, or credit of any kind. This is not true. You may be eligible for a mortgage within two to four years after receiving your bankruptcy discharge, depending on the type of mortgage and other factors.
You may face higher interest rates on your mortgage or car loan, but you can improve your credit over time by paying your bills on time and taking on debt slowly and responsibly. The fact that you have just filed for bankruptcy actually lowers your credit risk in some situations, because you will not be eligible for another bankruptcy discharge for several years.
Eliminating some of your debt using a bankruptcy discharge can allow you to pay your bills on time and start making smart financial decisions. As time passes, you will have more and more options available for getting the credit you need.
Losing All of Your Property
A Chapter 7 bankruptcy does require you to liquidate certain property, with the funds distributed to your unsecured creditors. However, your bankruptcy exemptions will protect much of your property for many debts. In fact, the vast majority of Chapter 7 cases are no-asset cases, where the debt does not have any property available to be liquidated.
You can also choose to reaffirm some of your secured debt if you’d prefer to continue making payments rather than give up your property. You can learn more about reaffirming debt by consulting with a bankruptcy attorney.
Bankruptcy Makes You a Bad Person
Some people just feel like they are letting down their families, communities, or themselves by filing for bankruptcy, or that a bankruptcy makes them irresponsible. In fact, many bankruptcies are caused by job loss, serious illnesses, or other circumstances that can affect almost anyone and cause severe financial problems.
Creditors know that a certain amount of the loans they give out will not be collected. This is part of their business model, and they often sell delinquent accounts to bill collectors for pennies on the dollar because there is a small chance of recovering the money they are owed. By the time you file for bankruptcy, some creditors may have more or less written off the debt you owe as a loss.
By filing for bankruptcy, you are acknowledging that you need some help and that you will make responsible financial decisions moving forward. You can discuss your fears with a bankruptcy attorney before deciding if bankruptcy is right for you.
We are a debt relief agency. We help people file for bankruptcy relief under the U.S. Bankruptcy Code.