It seems like everyone has an opinion about Chapter 7 bankruptcy – and they’re all too willing to share it with you. From gut-wrenching assertions that you’ll lose your house to fear-inducing statements about the black mark it will leave on your credit score forever, there’s no denying that these opinions create an aura of fear, uncertainty and stress regarding filing Chapter 7 bankruptcy.
Fortunately, many of these negative opinions are blatant myths – and if you’re buying into them, they could be costing you the opportunity to get the debt relief you need.
With that in mind, let’s take a look at the five biggest myths about Chapter 7 bankruptcy:
You’ll Lose Your Home/Car. This is perhaps one of the biggest myths about Chapter 7 bankruptcy – and nothing could be further from the truth. Under new bankruptcy laws, you can keep your house (and potentially your car) if it’s only worth a certain amount (this limit is pretty generous). If you own a significant house, it might be worth your while to look into a Chapter 13 or Chapter 11 bankruptcy to keep more assets.
Your Retirement Funds Will Be Cleaned Out. Certain retirement assets are exempt from being used to pay off debts, including your 401(k) plan and any IRAs. However, there is one exception to this rule: if you have recently taken out money from your retirement funds in an attempt to pay off your debts, the bankruptcy courts can use these funds to meet your creditors’ demands.
Your Credit Will Never Recover. After filing a Chapter 7 bankruptcy (or any type, for that matter), the bankruptcy will fall off your credit report after seven to ten years. However, that doesn’t mean you won’t ever be able to get a loan – in fact, you’ll find that credit card companies and alternative lenders are more than willing to work with you after a couple of years of financial responsibility.
You Have to Qualify to File. Prior to the 2005 bankruptcy law changes, it was much harder to qualify for a Chapter 7 bankruptcy. However, thanks to a means test that involves income and liability limitations, it’s much easier for individuals to have their petitions approved by the bankruptcy courts.
You Can Only File Once. While it’s true that bankruptcy laws have limited the amount of times you can file; however, that doesn’t mean you can’t file more than once. A new Chapter 7 bankruptcy petition can be filed for a minimum of eight years after your last Chapter 7 bankruptcy.
Don’t let the five biggest myths about Chapter 7 bankruptcy prevent you from getting the relief you need.