Millions of Americans file for bankruptcy every year. Then there are millions more who could benefit from filing for Chapter 7 or Chapter 13 bankruptcy but don’t.
People who put off or avoid bankruptcy have many reasons for their actions. Fear is one of the biggest. Specifically, the fear that when you file for bankruptcy protection, you will lose everything you own to your creditors.
Will I lose my house?
This is a common myth. The fact is, bankruptcy law usually protects your most important assets, such as your home, your car and much of your personal property. Chapter 7 bankruptcy, or “liquidation” bankruptcy, typically exempts at least some equity in your home, which can help you keep it or get a large portion of the proceeds if you sell it. If you don’t qualify for Chapter 7, Chapter 13 bankruptcy, in which you repay your debt in manageable monthly installments, also protects your most important property.
What about my credit score?
Another thing that worries people about bankruptcy is the effect on their credit score. Everyone knows that you need a high credit score to get approved for a mortgage, business loan or credit card. While it’s true that a bankruptcy filing will lower your credit, the effect is not permanent. Your credit score may begin recovering soon after filing, and you can qualify for a VA or FHA mortgage two years after you complete bankruptcy. Alternatively, staying trapped in the cycle of debt will only damage your credit score long-term.
Fear can’t help you. Facts can.
Bankruptcy has helped thousands of people in the Chatanooga area get past their debt problems, but it is not the only option. Before deciding whether Chapter 7 or Chapter 13 bankruptcy is the right move for yourself and your family, you need to know exactly how these forms of bankruptcy work. The source of information about personal bankruptcy protection is an attorney who focuses on bankruptcy law in Tennessee.