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Bankruptcy myths prevent consumers from filing for relief

Being saddled with unmanageable debt is a hard position to be in. The Arkansas consumer who is burdened with overwhelming debt is sometimes led into believing that filing a bankruptcy will be the virtual closing out of one's life. Nothing could be further from the truth. The consumer may do well to remember that these myths about bankruptcy are false and that they are largely the product of the credit card companies and other big credit interests.

One of the biggest paralyzing myths is that the individual or married couple will lose all of their assets if they file. Actually, most people keep the great majority or all of their assets. That is due to the federal exemptions provided by the Bankruptcy Code. The exemptions generally are substantial enough to exclude from seizure all of the standard consumer possessions, such as personal clothing, a small amount of jewelry, furniture, furnishings, televisions, and a computer and accessories.

In general, one's house and car may also be retained in the bankruptcy. If the house payments are behind, that usually means a Chapter 13 bankruptcy, where monthly payments will be made to the trustee to get the mortgage back up to date. Another major myth that scares people about bankruptcy is the myth that trying to pay off one's debts, even though one is hopelessly burdened by massive debt, is a much better option. Living with the ongoing pressure of a myriad of bills that bring a myriad of bill collectors is not better than wiping out the bill quickly and forever.

Generally, this means that credit card debt, medical bills and any unsecured loans will be wiped out under federal law. There is no other remedy that can do that for struggling consumers, whether living here in Arkansas or any other state. The related myth that bankruptcy will ruin one's financial future is also false. Credit scores can be built up and made excellent within two to five years. However, each case is different, and the bottom line of one's case can only be determined by consulting with an experienced consumer bankruptcy attorney.

Source: nerdwallet.com, "5 Bankruptcy Myths Dispelled", Sean Pyles, June 7, 2016

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