Bankruptcies have long been clouded in confusion and myth and much of what most people think they know about bankruptcies is false. Common misconceptions usually stem from third party accounts, exceptions taken as generalities, and pure misunderstanding of what certain terms that relate to bankruptcy mean.
Myth: Bankruptcies eliminate all debt
The most common bankruptcy myth is that bankruptcies allow individuals to get rid of all of their debts and start over fresh. Although many debts can be discharged through bankruptcy, debts discharged through bankruptcy are typically only consumer debt such as credit cards and short term loans. Debts such as mortgages, student loans, spousal and child support, and criminal or civil judgments are considered non-dischargeable debts and cannot usually be resolved through bankruptcy.
Myth: All property and assets are lost during bankruptcy
A myth which continues to remain extremely popular is that all property and assets are lost during bankruptcy and individuals need to forfeit their home, car, and retirement to file for bankruptcy. There multiple types of bankruptcy and each deals with assets and property differently. In general , certain types of assets such as approved retirement accounts and spousal support can almost never be collected upon in a bankruptcy proceeding, and others such as homes and cars can be protected from sale assuming their total value falls within an individual’s allowable exemptions budget. Protected property and assets remain the property of a bankruptcy filer during bankruptcy filings and following discharge assuming they make full payments on each item since not all debts are discharged during bankruptcy.
Myth: Bankruptcy always takes 10 years
Another common misconception about bankruptcy which is based on some truth is that all bankruptcies take years to discharge. Although most types of bankruptcy do take well over a year to discharge debts, chapter 7 filings allow individuals to receive discharge of all dischargeable loans usually within 4 months of initial filing. The quick time associated with chapter 7 filings make them ideal for individuals with few assets, considerable debt, and a need start over financially quickly. Chapter 7 bankruptcies offer filers the chance to begin rebuilding long-term wealth within a year of their initial filing.
To learn more about your bankruptcy filing options, contact one of our experience attorneys here at the Norton Law Offices. We have years of experience and are available to talk to our perspective clients about all options, including those you may not even know exist.