If you’ve never filed for bankruptcy before and you’re considering this form of debt relief, you may have a lot of questions. You’re certainly not alone. Many people who are approaching this process for the first time are trying to do the research and learn as much as they can.
Additionally, people may have learned certain myths about bankruptcy that they need to debunk. For these reasons and more, here are five common questions about the bankruptcy process.
Will it ruin your credit score forever?
No, bankruptcy will not ruin your credit score forever. You can rebuild it after you file. Your credit score will take a hit when you initially file for bankruptcy, but it’s also true that failing to pay off the debt that you already owe is going to negatively impact your credit score, as well.
Can you never get a loan?
There are certainly options to get loans and lines of credit after declaring bankruptcy. As noted above, you can repair your credit score with tools like secured credit cards until you qualify for the loans that you are seeking.
Are you going to lose all of your possessions?
No, you will not. Even with Chapter 7 bankruptcy, which (very rarely) results in the liquidation of non-exempt assets to repay creditors, many of the things that you own are going to be exempt. Many people have to get rid of far less than expected and most don’t lose any assets at all.
Does everyone qualify for bankruptcy?
No, they do not. It’s important to know if you qualify and which type you qualify for. For example, someone may fail the means test so that they don’t qualify for Chapter 7, but they may still qualify for Chapter 13 – which results in the creation of a repayment plan.
Is bankruptcy your own fault?
Most people find that the need to file for bankruptcy is not actually their fault. Top reasons for bankruptcy include things like job loss and medical debt, for example. If someone unexpectedly loses their job or contracts a serious illness, they could face expenses that are completely out of their control.
These five questions should help you start to understand the bankruptcy process. But you should also know that you can seek legal guidance at any time for additional clarity and personalized guidance.
