Chapter 7 is one of the most common kinds of bankruptcy – and it can wipe out large amounts of unsecured debt. Or, people can file for Chapter 13 bankruptcy to reorganize their debts and make them easier to pay off over time (with any remaining unsecured debts being discharged at the end of a three- or five-year period).
These options often help people who have overwhelming debts. But, not enough people file for bankruptcy because of common misconceptions. Here’s the truth about bankruptcy:
Myth 1: Bankruptcy only works for credit card debt
Truth: Many people file for bankruptcy because of overwhelming credit card debt. However, that’s not the only kind of debt that can be resolved. Some people file for bankruptcy because of medical debt, late fees and personal loans.
Myth 2: Your credit will never recover from bankruptcy
Truth: It’s true that people who file for bankruptcy will find that their credit scores will drop. This is to help prevent people from taking on new loans or credit cards. However, this isn’t permanent. With choice investments, anyone can raise their credit score and take on loans again.
Myth 3: You can only file for bankruptcy once in a life
Truth: In theory, there is no limit to the amount of times someone can file for bankruptcy in a lifetime. However, there is a limit between filing dates. For example, someone who files for Chapter 7 bankruptcy after previously filing for Chapter 13 bankruptcy may have to wait six years. Or, a Chapter 13 bankruptcy filing after a Chapter 13 filing could take two years. It all depends on what was previously filed and what a debtor intends to file next.
Myth 4: Only people who are bad with money file for bankruptcy
Truth: Someone who suffers from a medical injury could find that they’re required to pay thousands of dollars in medical debt. For people like this, this debt is often unexpected. In many cases, an unexpected debt can’t be paid even by people who are especially good at keeping records of their expenses.
People don’t have to suffer from overwhelming debts. By understanding your legal options, you may be able to lift a great financial weight off of your shoulders.