Despite bankruptcy being one of the best ways to get rid of debts, there are numerous myths associated with bankruptcy because of which people are wary of filing for it. However, say lawyers of Los Angeles based bankruptcy law firm Recovery Law Group, it is important to sift fact from fiction, especially about something as important as a bankruptcy.
Here’s a look at some of the most common myths associated with bankruptcy.
#1 If you have a job, you can’t file for bankruptcy
In the case of Chapter 7, debts are discharged, after the filer’s non-exempt property is sold off to pay your creditors. However, Chapter 13 bankruptcy involves repaying some portion of your debts to the bankruptcy trustee, as per the court-approved repayment plan. Apart from this, additional costs include filing fees, the fee for credit counseling course as well as the attorney’s fees. Regular payments as per your plan are essential in this case.
If you lose your job and find it difficult to make payments, you can ask the judge to modify your payment plan. Throughout the plan, your total repayment amount will remain the same, however, the payments can decrease when required and increase when you can afford to make payments. When you file for bankruptcy you are required to provide your last two months’ pay, your past six months of bank statements, as well as last four years of tax returns.
#2 Bankruptcy makes you bad
Despite insurance cover, a huge amount of medical bills can send anyone towards bankruptcy. It is not surprising to note that most people who file for bankruptcy owe huge debts towards medical bills. Majority of these people are working citizens who regular pay taxes. When you file for bankruptcy you can get rid of several debts including credit card bills, personal loans, etc. Majority of the debts catered to in a Chapter 13 bankruptcy are secured ones like mortgage, automobile debt, child support, alimony, and taxes. A small percentage of your repayment amount goes towards settling your unsecured debts. After completion of the repayment plan, any unsecured debt which remains is discharged, with creditors sometimes end up receiving nothing.
People can get rid of their debts by other methods too. Seeking a reduction in their debts might make a better option than filing for bankruptcy. If possible, bankruptcy should always be the last option for people to address their debts. You need to ensure that the timing of your bankruptcy is perfect. It is better to wait some time if you are expecting more medical bills in the near future. A qualified bankruptcy attorney can suggest the best time to file for bankruptcy as well as the chapter you would benefit from. If you are looking for a consultation, you can call 888-297-6023.
#3 Your credit is ruined by bankruptcy
Bankruptcy indeed has a negative effect on your credit report; however, the effect is not permanent. In most cases, people who file for bankruptcy probably have bad credit which can only go one way. Bankruptcy wipes your slate clean and thus, in the long run, filing for bankruptcy will improve your credit score by getting rid of bad credits. In the case of Chapter 7 and Chapter 11, bankruptcy remains on your credit report for 10 years while Chapter 13 bankruptcy Los Angeles appears for 7 years. Despite this, filing for bankruptcy will probably help you in getting rid of debts which you had no way of clearing.
Filing for bankruptcy might cause you to have some difficulty in getting credit after discharge because declaring bankruptcy puts you in the credit risk bracket. Despite this fact, bankruptcy filing helps you get rid of the huge mountain of debt and provides your disposable income for your use. Responsibly managing your money after you get your bankruptcy discharge goes a long way in rebuilding your credit. Since a credit check is done usually when you are seeking employment or while making big purchases like house or vehicle; if you are already in possession of all, bankruptcy won’t have much effect on you, except getting rid of debts. It is therefore vital that you consult experienced bankruptcy attorney to get hold of your finances while divesting you of your debts.