The decision to file for bankruptcy should not be taken lightly. But bankruptcy is not just a last resort for those who need a life preserver. Some people choose to drown in debt when they should actually file for bankruptcy, because they have been led to believe certain false myths about bankruptcy. Don't let the following myths hold you back from getting your financial footing:
"I'll Lose My Home and Car"
One myth that prevents some people from filing for bankruptcy is the notion that they will be forced to live in a cardboard box if they do. This is not the case, if consumers file a Chapter 13 bankruptcy, which allows them to keep their home and car - provided that they keep up with the payments set up during the bankruptcy process. In fact, if a car was repossessed before the bankruptcy is filed, the debtor may have the opportunity to get that property back if it has not yet been sold.
"I'll Lose My Retirement Savings"
Similarly, some people are afraid to file for bankruptcy because they believe that the retirement funds that they worked hard to build will be taken away from them during the process. Whether consumers file a Chapter 7 bankruptcy, which liquidates assets to pay off creditors, or a Chapter 13 bankruptcy, their retirement funds - like a 401(k) or IRA - will be exempt from the bankruptcy. However, if debtors do withdraw funds from these accounts, they will need to report that in their bankruptcy case. This is something consumers should keep in mind if they use money from retirement accounts to try to pay off their debts. Instead of taking that step, they may be better off letting the retirement account money stay put.
"I'll Lose the Ability to Ever Get Credit Again"
This could not be further from the truth. Although a bankruptcy does stay on a debtor's credit report for 10 years, that doesn't mean they will have to resort to borrowing money from a loan shark if they want to buy a home or car later on. Many lenders will give someone a home or car loan, or even a credit card, post-bankruptcy. However, debtors should keep in mind that a bankruptcy will significantly increase their interest rates, so it may be wise to obtain a car note or mortgage prior to filing for bankruptcy.
Get More Specifics from a New Jersey Bankruptcy Lawyer
These are a few common myths people believe about bankrutpcy that may keep them from cleaning up their financial situation. If you have further questions about your specific situation, we offer a free consultation and can help you decide if bankruptcy is the best route for you. Contact us today online or give us a call at 973-870-0434.