Bankruptcy - Myths and Facts

There are many myths associated with bankruptcy. It is in fact not that scary, as people have considered it to be. The credit for this popularized scariness goes to the several misconceptions that are hovering around this financial step. Let me give you a brief insight into some of those myths.

Myth 1: Filing Bankruptcy: Everyone Will Come To Know

Most people think that when they file for bankruptcy, everybody will come to know about it. Well, it is just a misconception, as until you do not tell anybody specifically about that, it is very unlikely that others will get to know that you are filing bankruptcy. The people who know about this fact include your creditors only. Obviously, you cannot hide this fact from them. However, if you are a major corporation or a prominent person, and media is giving special coverage to your case, you certainly get nothing much to do to keep the proceedings a secret. In normal scenario, despite the fact that such cases are public proceedings, does not mean that your case will be publicized. It is very important for you to understand that you are not the only person who is filing for bankruptcy. There are thousands of others as well. Therefore, it is very unlikely for every case to get the attention of public. No media has enough time, money, work force, or even interest to cover all of these cases. Even publications do not have much space.

Myth 2: Filing under chapter 7 means all debts will be wiped out

Another popular misconception is that, filing under chapter 7 bankruptcy helps you wipe out all kinds of debts completely. The laws pertaining to the same do not allow discharging or erasing some specific types of debts. These specific types of debts may include debts incurred as the result of fraud, government-guaranteed or government-issued student loans, debt related to alimony, debts related to child support etc. What is more, if some legal settlements are also under process, such amounts are also not dischargeable. It means, if in some earlier legal cases, you have been order to pay a specific amount of sum to the person who had sued you, you will be liable to pay the same even after you have been discharged bankruptcy.

Myth 3: All Your Assets Will Be Sold Off If You File Under Chapter 7

Likewise, people also have the misconception that if they file under chapter 7 and are granted bankruptcy, all their assets and properties will be sold off completely. In fact, many people who need to file under this chapter do not do so because of this fear that they will lose everything. However, you will be glad to know that you will not lose everything even if you file under chapter 7. The laws pertaining to the same also provides a provision of exemptions to certain kinds of properties, which may include clothing, household goods, and money in qualified retirement plans, vehicles, residential properties, and much more.

Overall, there are many myths associated with bankruptcy.