Three Myths About Bankruptcy: Get the Facts
Misinformation about bankruptcy is often repeated among those who don’t understand exactly how it works. Individuals who are struggling with debt should learn the facts when determining whether bankruptcy is a viable solution. These are the truths behind three common bankruptcy myths.Bankruptcy Results in Complete Property Loss
Many people think they will lose their home, vehicles, and other assets if they file for bankruptcy. However, most individuals who file for bankruptcy keep their possessions, including any items essential to their daily lives. Valuable assets, such as luxury items, may be sold to settle a portion of the debt.
In Chapter 13 cases, the value of assets is weighed against the amount of debt when creating a court-approved repayment plan. However, an individual can opt to keep his or her car or home if payments can be made under the terms of the plan. A bankruptcy attorney can advise about this process.Credit Will Never Recover After Bankruptcy
It’s possible to rebuild credit after a bankruptcy filing. Many individuals who file for bankruptcy can actually qualify for credit cards, car loans, and other forms of credit soon after the case is discharged. However, rates are typically higher than those offered to individuals with perfect credit. A bankruptcy remains on a person’s credit report for up to 10 years.Bankruptcy is a Last Resort
Common wisdom suggests that debts should be paid even if an individual can no longer afford to do so and that bankruptcy should only be pursued in the absence of any other option. In fact, it can be advantageous to file for bankruptcy when compared to accruing interest, fees, and other costs associated with debt repayment. In general, a consumer should consider bankruptcy if he or she pays more than 50 percent of his or her annual income toward debt and the total amount of that debt will not be repaid within five years.
Families in Rhode Island who are considering bankruptcy can use the legal counsel of The Law Offices of Stephen P. Levesque to weigh their options. We can provide helpful resources and answer questions about the process. Call (401) 490-4900 or contact us online for a free, confidential consultation.