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3 common misconceptions about chapter 7 bankruptcy

On Behalf of | May 27, 2024 | Bankruptcy

Filing for Chapter 7 bankruptcy is a significant decision, but it may provide a fresh financial start for those struggling with overwhelming debt. However, many people hesitate to explore this option due to common misconceptions.

When you find yourself financially overextended, there are a few facts that you should know.

Myth 1: you will lose all your assets

One of the most common misconceptions about Chapter 7 bankruptcy is that you will lose all of your possessions. In reality, bankruptcy exemptions allow you to protect certain assets, such as a primary residence, personal vehicles, household goods and retirement accounts.

Myth 2: bankruptcy ruins your credit forever

While filing for Chapter 7 bankruptcy will initially have a negative impact on your credit score, it does not ruin your credit forever. The bankruptcy will remain on your credit report for up to 10 years, but you can start rebuilding your credit immediately after discharge of the case. By making timely payments, keeping balances low and avoiding new debt, you can gradually improve your credit score.

Myth 3: everyone will know you filed for bankruptcy

Although bankruptcy is a matter of public record, it is unlikely that your friends, family, or employer will find out unless you tell them. The only entities typically notified of your bankruptcy are your creditors and the court.

If you are struggling with debt and considering bankruptcy, it is important to educate yourself about the process. Understanding the facts can help you determine if this is the right path for your needs.