Before declaring bankruptcy, make sure you have all the facts about this important legal process. Though bankruptcy is more common than ever, myths about it are still prevalent. Read on to find out five of the most important facts about bankruptcy.
- Though most of your debt will be eliminated, some obligations will survive bankruptcy. It is true that bankruptcy will discharge most of your debt, like medical bills, personal loans, and credit card debt. However, some debt will survive bankruptcy, like student loans, alimony, and child support. Even after a bankruptcy, you will have to pay all of these debts in full. Hence, consider what types of debt you have before filing for bankruptcy.
- You will not lose everything you own. One common misconception is that bankruptcy filers must forfeit everything they own, but this simply isn’t true. In a Chapter 7 bankruptcy, you may have to give up some of your valuable personal property, but you will be able to keep most of it. In a Chapter 13 bankruptcy, there is no danger of losing property.
- Bankruptcy cannot usually drain your retirement accounts. If you’re worried that declaring bankruptcy now could mean sacrificing a comfortable retirement, you’ll be glad to know that bankruptcy will not touch your retirement accounts. Up to about $1 million in an IRA will be exempt from bankruptcy proceedings, as will unlimited rollover amounts. Seeking debt relief now won’t mean giving up a comfortable lifestyle later.
- Bankruptcy won’t ruin your credit forever. Though bankruptcy is a negative thing, it won’t stay on your credit report forever. After no more than ten years, a bankruptcy will “fall off” a credit report and will no longer appear. Even while bankruptcy appears on your credit report, you will still be able to get credit if you can show a recent history of financial responsibility.