With more than 1.5 million consumer bankruptcy filings over the past year, many people are realizing the truth behind several misconceptions surrounding bankruptcy. Stay informed and be aware of the following bankruptcy myths:
1. Anyone Can Qualify For Bankruptcy
Both Chapter 7 and Chapter 13 bankruptcy have more restrictive eligibility criteria since the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. To qualify for Chapter 7 bankruptcy, a debtor must either have an income that is below the state median or must pass a “means” test. Chapter 13 bankruptcy requires that debtors have enough income to repay their debts in a period of three to five years. Both types of filings also require debtors to receive credit counseling.
2. All Debts Are Discharged With Chapter 7 Bankruptcy
Chapter 7 bankruptcy, also known as liquidation, is one of the most common types of consumer bankruptcy. It divides your property into exempt and non-exempt categories, and uses a portion of your belongings to repay creditors while discharging most unsecured debt. However, items such as child support, back taxes, student loans, and secured debt are not affected.
3. Bankruptcy Stays On Your Credit Report Indefinitely
Many people are hesitant to seek the counsel of a bankruptcy lawyer because they are concerned that it will permanently ruin their credit score. Yet either Chapter 7 or Chapter 13 bankruptcy can only stay on a person’s credit report for a maximum of ten years. During that time, you will have the opportunity to rebuild your credit score.
For professional bankruptcy help, consult the expert lawyers here at Cutler & Associates, Ltd. With seven locations throughout Chicago, we are dedicated to providing accurate and reliable legal guidance throughout your bankruptcy proceedings.