Misconceptions About Bankruptcy

Bankruptcy: just the thought of it gives you the heebie-jeebies. You’re worried about getting an awful credit rating, losing your possessions, and becoming the laughingstock of the neighborhood. But instead of letting your thoughts run away with you, getting some basic information about the realities of bankruptcy may bring you a little relief. With the caveat that there is more than one type of bankruptcy and understanding that every situation is unique, some general facts about bankruptcy may give you peace of mind.

Your Credit Rating

Let’s be honest: your credit rating has likely already been dinged up a little. Bankruptcy is certainly not going to help it in the short run but over time you will have the chance to rebuild with a fresh start. Responsible habits can start to show results within as little as three years in some cases, although the bankruptcy will show on your credit report for seven to ten years.

Your Possessions

Are you going to have to part with all of your earthly possessions in a bankruptcy? Certainly not! All people in this situation are allowed to keep some items, and, believe it or not, most people keep all of them. Property that has not been listed as collateral for a loan can be protected by bankruptcy exemption laws. That typically applies to personal items like clothing and jewelry, as well as furniture, appliances, and quite possibly your home and car. Here’s how the exemption laws work:

• You are entitled to keep property worth below a given amount.
• The value of the property is based on how much equity you have in the item, not on the
• In other words, it’s the current resale value – the amount owed = value in bankruptcy.
• For example, if your vehicle is worth $5,000 and you owe $4,000, the bankruptcy value is just $1,000 for that $5,000 vehicle.

So you get to keep the car, but are still responsible for the balance on the loan. The good news is that you can’t lose it due to bills due to other creditors with unsecured loans. 

The Laughingstock? 

Although bankruptcies are available in public records, the fact of the matter is that most people never take it upon themselves to look up those records. What would be the point? Yes, it’s possible for someone to find out about your financial situation, but it’s pretty darn unlikely. 

Calming Your Fears

At the Law Office of Julia Kefalinos, we won’t tell you that bankruptcy is completely pain-free. But perhaps it’s a little less horrendous than you were imagining. Schedule a confidential consultation with one of our experienced Miami bankruptcy attorneys and get your questions answered today.

Source:

library.nclc.org/book/surviving-debt/correcting-common-misconceptions-about-bankruptcy