The bankruptcy process can be intimidating to anyone dealing with overwhelming debts. Most people fear the process under the assumption it will lead to worse consequences. The truth is, not paying your debts will always lead to worse outcomes than filing for bankruptcy. In fact, most of the fears associated with bankruptcy are based on some misunderstandings and myths.
Have No Fear
One of the biggest myths about bankruptcy is the idea that you will lose everything you own. While some of your non-essential assets may be sold to repay your creditors, this certainly isn’t always the case. In Chapter 13 bankruptcy, you get to keep virtually everything as long as you make your payments according to the debtors plan. In Chapter 7 bankruptcy, most of your personal property (including your car, furniture and some luxury items) is exempt from liquidation under bankruptcy exemption laws.
People also fear the effect bankruptcy may have on their credit, assuming that filing for bankruptcy will lower their credit score. Actually, the opposite is true. Having your debts discharged in bankruptcy will improve your credit score because your debts will be resolved. Most people find that their credit improves right away. Although a bankruptcy may make future credit more challenging, it by no means prevents you from obtaining more credit.