There are a number of misconceptions that currently exist about the process of bankruptcy. The different consumer watchdog organizations are working to promote only accurate information about this whole procedure that can provide people with debt relief. There are some common myths that are also associated with this process such as it is possible for people to get rid of every type of debt when they choose this option or that once they file they will simply end up losing everything, which includes their pet dog. However, when people are considering it as an option for themselves during a financial crisis, it is best for them to know everything about it.
When filing for bankruptcy, people should keep in mind that there are some debts that can never be included in the case regardless of the financial circumstances of individuals. According to the federal bankruptcy codes, it is not possible for individuals to eliminate tax bills and court fines that are less than three years old and child alimony cannot be included either. Any type of federally issued student loans can also not be included either unless the college has closed or an individual is able to convince a judge about permanent and serious disability.
Types and Function
Consumers either file under Chapter 7, which is complete debt forgiveness or opt for Chapter 13, which is partial debt repayment. Individuals who are earning more than the annual median income level of their state only have the option of filing for Chapter 13 bankruptcy and have to partially pay off their debts. However, no matter which type of bankruptcy is filed by an individual, once the legal paperwork has been submitted by their attorney, creditors can no longer contact the person legally unless they have obtained the consent of a judge.
Credit Reporting Time Frame
The credit rating of individuals will suffer because of bankruptcy filing and it will become even more difficult for them to either get new credit or even new apartments and job. As per Ralph A. Ferro Jr., a NJ bankruptcy lawyer, the consumer credit report of an individual will show that you filed for Chapter 7 bankruptcy for about 10 years from the date it was filed. As far as the Chapter 13 bankruptcy is concerned, its impact will last for about seven years from the date of the filing.
There are some costs that individuals have to bear when they are filing for bankruptcy in court. But, the court fee doesn’t include anything that may have to be paid to the attorney if people are using legal assistance.
Other common misconceptions of people about bankruptcy include their belief that they will lose their basic personal possessions and retirement accounts when they file for bankruptcy. This is not true, but what else they may lose is actually dependent on where people are residing at the time of filing. Most individuals are able to retain a part of their motor vehicle equity, electronics, real estate equity, tools of the trade and jewelry when they file for bankruptcy.