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The two most damaging misconceptions about Chapter 7 bankruptcy are that it will ruin your credit and cause you to lose your assets. Both of these myths are wholly untrue for the vast majority of clients.
Although they are relatively new, credit reports are believed to have been a part of our economic system for hundreds of years. Entrepreneurs created a method in the late 1960s for gathering financial data on consumers and selling it to subscribers, the majority of whom were and are banks and lenders of various kinds. This system is used by prospective and actual creditors to assess creditworthiness and establish penalties for noncompliance with terms that extend beyond any one specific loan.
As a result, a consumer’s credit is typically impacted when they have trouble paying their debts. Therefore, it is the payment history rather than seeking relief under the bankruptcy code that leads to poor credit.
The Bankruptcy Code provides exemptions that shield some assets from liquidation to those who file for relief. The choice between allowing debtors to select both federal and state exemptions or limiting them to state-only exemptions must be made by each state. In Pennsylvania, where I work, debtors have a choice. The exemptions provided by the Bankruptcy Code provide some protection for the equity in a primary residence, household goods and furnishings, vehicles, and what is known as the “wild card exemption,” which typically protects small sums in bank accounts.
Assessing the assets to see if they are exempt is one of the first duties of bankruptcy counsel. If so, legal counsel can proceed to assess whether the income and expenses indicate that filing for Chapter 7 bankruptcy is the best option. If the client will lose assets, no competent bankruptcy attorney will advise a Chapter 7. As a result, assets will probably not be lost as a result of Chapter 7, as a case won’t be filed unless assets will be safeguarded.
A knowledgeable attorney can walk you through each step without requiring you to do any thinking. Visit https://recoverylawgroup.com/bankruptcy/ to make an appointment for a consultation.
Chapter 7 is appropriately referred to in the business as a Fresh Start since the filing of the Chapter 7 itself typically results in the removal of most debts rather than the loss of assets or damage to credit over and above what previously transpired due to delinquency.
Anyone struggling with debt, whether it be from credit cards, personal loans, medical expenses, mortgages, auto loans, or taxes, should contact with a knowledgeable bankruptcy attorney who has expertise with cases similar to theirs.