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Don’t fall for these common misconceptions about bankruptcy

On Behalf of | May 4, 2020 | Bankruptcy

Young married couples in Oregon may be in love, but even love cannot change the fact that they also may have accumulated a significant amount of debt that they either came into the marriage with or incurred after they were married. They may have a mortgage on a starter home, credit card debt or perhaps even medical debt. As much as they may try to meet all their financial obligations, sometimes their debt simply overwhelms their finances and they find themselves contemplating Chapter 7 bankruptcy.

Filing for bankruptcy may sound scary, but it is actually a way to settle outstanding debts, allowing debtors to move into the future with a fresh financial start. It is important to understand that there are many misconceptions that people may have about filing for Chapter 7 bankruptcy. This post will delve into these misconceptions.

Chapter 7 bankruptcy is also known as a “liquidation” bankruptcy, since it involves selling off a debtor’s assets in order to pay back the debtor’s creditors. However, this doesn’t mean the debtor will lose everything. Debtors are permitted to retain certain assets through exemptions. These exemptions are based on state law, and can include household goods, one automobile, clothes, retirement accounts and depending on its equity, perhaps even the family home.

One reason that couples may be hesitant to file for Chapter 7 bankruptcy is that they’re afraid it will ruin their credit. However, they may be able to get a loan due to the fact that they have eliminated many of their debts and cannot file for bankruptcy a second time for a number of years. While interest rates may be high, it is possible to re-establish good credit.

Finally, couples may think they are better off trying to pay back their debts because they think bankruptcy is too expensive. However, it could take years for debtors to pay back what they owe, if they are able to pay them off at all, whereas filing for Chapter 7 bankruptcy allows them to extinguish at least some of their debts within months. And, while filing for bankruptcy does come with some costs, such as legal costs, these costs are often minimal when compared to the amount of debt one has.

As this shows, there are many positive aspects of filing for Chapter 7 bankruptcy. While it may not erase all of one’s debts, it can also serve as the springboard needed to make a clean break and move forward on fresh financial footing.

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The Law Office of Kim Covington, is a woman owned debt relief agency, and I have helped families, individuals and small businesses, file for bankruptcy relief under the U.S. Bankruptcy Code, for over 24 years.