Although there is a lot of information about bankruptcy available on the internet, there are still a lot of fears about filing bankruptcy.
Below are a few of the most common bankruptcy fears and why they have no basis in reality:
- The biggest fear that many debtors have of bankruptcy is that they will lose all of their assets and be forced to live like a subsistence urban dweller. The reality is that 95 percent of all bankruptcy filings don’t involve any assets which are either not exempt or worth the time, money and effort needed to liquidate them. In other words, most bankruptcy debtors can walk away from their debts without losing any of their assets.
- Another bankruptcy fear is the fear that creditors will either become more aggressive in trying to collect on debts or that they will challenge the bankruptcy’s validity. While it is true that the creditor can challenge a bankruptcy discharge it is something that rarely happens. And when it does happen, the creditor must have a valid reason for challenging the debtor’s bankruptcy discharge. Whether or not a creditor challenges a bankruptcy discharge, they are not allowed to try to collect on any debt after the debtor has entered the bankruptcy process. If the creditor attempts to collect on a debt while the debtor is in bankruptcy, they can and will be punished.
- Some debtors also fear that they will be unable to get any credit from a specific creditor after they file bankruptcy. For example, maybe they have a mortgage lender who they want to keep as they continue to pay their mortgage throughout and after bankruptcy. In this case there is no need to fear, it is unlikely any mortgage lender will drop your policy simply because you filed bankruptcy. And as long as you are paying your mortgage either through the bankruptcy system or on your own, they cannot foreclose on your property.