There are few things in life as daunting as declaring yourself bankrupt.
But in these difficult financial times, this is a decision that many people face as they look to rebuild their lives.
Even in today’s economic climate, the issue of filing for bankruptcy is shrouded in myth, mystery, and negative rumors.
So here are 4 of the most common misconceptions surrounding bankruptcy and why they are not necessarily based on truth or fact.
1. Everyone that files for bankruptcy is a loser
Even President Trump filed bankruptcy at least 4 times for his businesses.
More than 182,000 bankruptcy filings were recorded during the first three months of 2013 in the U.S. alone – that’s a lot of losers then.
In fact, losers are more likely to be people who don’t file bankruptcy when they should. They hurt themselves and their children because they didn’t file.
2. Your home and property is at risk
Most Minnesotans lose absolutely nothing when they file bankruptcy.
You can keep:
- An equity in your home of $390,000
- Your car
- Your pension plans
- Your 401k plans
- Your IRAs
- Your household goods like your clothes and furniture
- Personal injury claims like car accidents
- And more
Cartoon images of men with no belongings and only a barrel to live in have tried to convince people that those who have filed for bankruptcy are left with nothing.
In reality, over 90% of consumer filings are ‘no asset’ cases where none of the debtor’s property is sold.
Knowing the exemption rules in Minnesota is important before filing bankruptcy here.
Most property, including your home and vehicles, remains untouched.
3. Your credit rating will be damaged
Believe it or not, filing for bankruptcy can actually increase your credit score.
Why? Because you get out of debt immediately.
People who loan money are then more confident that you can repay their loans so they are willing to lend to you.
Everybody who files Chapter 7 bankruptcy in Minnesota is currently getting at least 6 offers to buy cars on credit within a month after they file bankruptcy.
Most people are also getting several credit card offers within that month after they file bankruptcy.
If you want to buy a house, most of the government agencies that guarantee home loans like FHA and Fannie Mae will ignore your bankruptcy after 2 years.
Many people who believe credit is ruined for 10 years when you file bankruptcy have been misled by a public relations campaign called the Ten Year Mistake Campaign that is promoted by some lenders.
4. You have to be poor to file for bankruptcy
It’s not just poor people that file for bankruptcy – far from it.
Even if you are in the higher wage bracket, you, more than likely, will be able to file.
Your circumstances other than your income dictate here.
Depending on your circumstances, such as the kind of bills you owe and your expenses may qualify you to file even if your income is high.
If you don’t qualify for Chapter 7 Bankruptcy, you can almost always file Chapter 13 even if your income is too high…and remember, when you file for Chapter 13 Bankruptcy you don’t necessarily have to pay your creditors in full.
This subject is too complicated to describe here, and you will probably have to consult an experienced Minnesota bankruptcy attorney to see what bankruptcy can do for you.
Fill in our Free Bankruptcy Evaluation Form to see whether you could qualify for Chapter 7 or Chapter 13 Bankruptcy.
Contact Us at 612.824.4357 now to tell us what you need us to do for you.