Filing for bankruptcy is often the last resort for individuals dealing with overwhelming debt because they believe it comes with major sacrifices. However, filing for bankruptcy has helped millions of Americans build a better financial future. Since there are many false claims about bankruptcy, our bankruptcy attorneys in Scranton debunk the most common bankruptcy myths.
Myth #1: You Will Lose Everything in Bankruptcy
If you file for bankruptcy, you can rest assured that you won’t lose all of your valuable assets. There are bankruptcy exemptions set in place to help debtors keep some of their assets. In Chapter 7 bankruptcy, you get to keep certain personal belongings, benefits, and more. Technically, Chapter 7 is referred to as a “liquidation” bankruptcy, and in rare cases, it is true that the trustee can collect nonexempt property to sell and pay creditors. However, most consumers who file a Chapter 7 bankruptcy case keep everything that they own.
When a person has more property that they would be allowed to keep in a Chapter 7 case, they will sometimes file a Chapter 13 bankruptcy case instead. In a Chapter 13 case, the person usually keeps all of her property. Chapter 13 bankruptcy can help make it manageable for individuals to keep up with mortgage payments and other debts.
Myth #2: Bankruptcy Gets Rid of All Debt
Many people believe that bankruptcy will get rid of all types of debt. However, bankruptcy only eliminates certain “unsecured” debts. Unsecured debt refers to debts such as credit cards, medical bills, or loans that are not backed by collateral. Since these debts are riskier for the lender, they often carry higher interest rates. These debts can be eliminated through bankruptcy.
Bankruptcy can’t completely eliminate most secured debts. Secured debts are backed by collateral, and the bank can seize the collateral if the debtor can no longer make payments. Common types of secured debt include car loans, mortgage payments, and more. A bankruptcy filer usually has a choice of how to handle these debts. They can stop paying them and surrender the collateral, or they can continue to stay current on the loan and may keep the collateral.
If you are ready to get started on your path toward financial freedom, contact our Pennsylvania bankruptcy lawyers today at (570) 458-2008 for a free consultation!