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Common Myths and Misconceptions About Chapter 7 Bankruptcy
Admin • Jan 03, 2018
For many people facing a challenging financial future, bankruptcy is the best option to get out from under the burden of debt. Depending on your disposable income, you have the option to file for chapter 7 or chapter 13 bankruptcy. But for many individuals, chapter 7, or liquidation bankruptcy, is the best way to start over.
Before you file for chapter 7 bankruptcy, it is important to understand the process, including some of the myths about filing that you may have heard. Here are a few common myths and misconceptions that people believe about chapter 7 bankruptcy.
Chapter 7 Will Completely Destroy My Credit
When you file for chapter 7 bankruptcy, it will remain on your credit report for 10 years. 10 years can seem like a long time, and you might think that working out a payment plan with your creditors, or ignoring your debt altogether, is a better option. Unfortunately, when you let your debt keep piling up, it can have disastrous repercussions that are far worse than filing for bankruptcy.
Chapter 7 bankruptcy will remain on your credit report for 10 years, but it won’t make you incapable of getting a credit card or purchasing a home or car during this time. Your debts are wiped clean with chapter 7 bankruptcy, and this will be reflected on your credit report. Additionally, there are several steps you can take to continue to improve your score after your Chapter 7 bankruptcy is discharged:
- Apply for a secured credit card. A secured credit card allows you to deposit a certain amount of money that is used to make purchases. If you continue to make your payments on time, the bank might offer you a traditional, unsecured card down the road.
- Make all of your payments on time. Paying all of your bills on time is a great way to improve your credit score.
- Avoid applying for too many loans. Applying for several loans and credit cards can have a detrimental impact on your score. Instead, research loans and cards before applying to find the best deal.
Keep an eye on your credit score and look for any inaccuracies. If you find any, contact the credit bureau to have the charges disputed.
It Is Ok to Go on a Shopping Spree Before Filing for Chapter 7 Bankruptcy
If you're drowning in debt and planning to file chapter 7 bankruptcy in the future, why not have some fun and run up your credit cards? Unfortunately, this unwise financial choice can be devastating and might impact your ability to file for bankruptcy.
A judge and trustee will closely examine your spending habits before you file. If you were irresponsible with your spending or took on unnecessary debt before filing, the debt will often not be forgiven or may even cause you to lose out on the protection afforded by chapter 7 bankruptcy.
I Will Lose Everything If I File for Chapter 7 Bankruptcy
Many people believe that they will lose everything if they decide to file for chapter 7 bankruptcy. However, depending on where you live, certain exemptions will allow you to keep some of your property.
For example, the state of Alabama has a wildcard exemption that allows you to keep up to $7,500 in various types of personal property, meaning that if you have $7,500 in furniture or other personal property that you'd like to keep, it is possible if you use the wildcard exemption.
Filing for chapter 7 bankruptcy can be a confusing process. If you have any further questions about filing for Chapter 7 or Chapter 13 bankruptcy, contact the professionals at William C Poole, LLC.
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