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Bankruptcy Misconceptions

There are numerous myths and misconceptions that surround bankruptcy. The process and outcome of bankruptcy offer a fresh financial beginning. There is an inherent aspect of stigma attached to debt, which makes many people shy away from it, especially when they feel that it could result in bankruptcy. At times, bankruptcy may be the best tool that would help you protect your assets. Having said that, this article explores some of the biggest myths and misconceptions about this stigmatized area of finance.

Destroying Your Credit

You can repair your credit after filing for bankruptcy as it serves as a new financial beginning for most individuals. Bankruptcy can be on your credit report for a most 10 years after you successfully file your bankruptcy case. Meanwhile, it clears your old payment histories and debts; thus, you have a chance to improve your pre-bankruptcy credit score. Even though you can start building your credit score immediately after you file your bankruptcy case, the effect that bankruptcy has on your credit score will vary depending on what your credit score was before you filed the case.

Losing Your Personal Property

Whether you file for Chapter 7 or Chapter 13 bankruptcy, there is a little probability of your property being sold to recoup the debts you owe to your creditors. In most cases, it helps you protect your personal property against your creditors, but it clears liens against your property. It is worth noting you're your property cannot be seized to settle your debts that have been written off by bankruptcy. Nonetheless, when your creditor offers an affirmation of the debt, this process can be enforced. The laws that govern bankruptcy vary from one sate to another; hence, you should consult an attorney within your state to know how bankruptcy can protect your personal property.

Losing Your Job

You will not lose your job if you file for bankruptcy. The bankruptcy code protects you from being discriminated by your employer for filing bankruptcy. It is also unethical for your boss to fire you for filing for bankruptcy. However, your potential employers are legally allowed to scrutinize your credit file, but they are prohibited from discriminating against you on such financial grounds.

Clearing Your Debts

Although insolvency will wipe out most of the debts that you owe, some debts which are exempted from Chapter 7 and Chapter 13 bankruptcies. For instance, you will still have to repay student loans, federal and state taxes as well as all debts that you may have accrued from fraud cases. Notably there exist caveats to instances of student loans, and you should consult an attorney for better understanding. Furthermore, income taxes that are at least three years old may be discharged in bankruptcy if you meet certain criteria. Ensure that you consult an attorney to confirm if you are qualified for discharge of aged IRS obligation.

Killing Your Dreams

You should not be ashamed that you are bankrupt. It is a positive step to come to realize that you are in the situation and you are doing something to change it. Some of the most successful individuals in the US had filed for bankruptcy before being successful, for instance former US President Ulysses S. Grant, Anna Nicole Smith, Grant, Burt Reynolds, and Larry King. Even after filing for bankruptcy, you are the only person who can limit your dreams—you can still achieve great thing. Therefore, do not blame yourself for being bankrupt.