There are many fallacies about bankruptcy that keep the public in Arkansas and elsewhere confused about the impact and value of this consumer remedy. The best way to debunk those false stories and urban legends is to consult with an experienced consumer bankruptcy attorney. That is the best way to learn authoritatively about one's options and available remedies under the circumstances. That being said, a few of the major misconceptions are discussed below.
Many people express a fear that they will lose everything if they file bankruptcy. That is far from the truth. In Arkansas, the consumer may choose the ample federal exemptions which allow the retention of most of one's personal property, furnishings and personal belongings. A car can be retained through the exemptions. In addition, the trustee does not want to take a car that has a loan on it because the trustee will get nothing out of it after paying off the loan.
The same principle applies to one's home: the trustee will not take a home that has a high mortgage on it because there will be nothing left after paying the bank and providing the debtor with the applicable exemption amount. Where that mortgage is up to date, the consumer may erase unsecured medical and credit card debt while retaining the home and continuing to pay on it. Again, the options available must be discussed with a seasoned consumer bankruptcy attorney to understand how the law will impact any particular case.
It is also a fallacy that one can never get credit again after the bankruptcy. Actually, most people who have filed and completed their cases obtain new credit within a relatively short time after the case ends. The real issue for people to decide is whether they will commit themselves to saving in their post-bankruptcy life instead of risking the same dangers that previously occurred. The credit will become available, but the biggest challenge for the consumer will be to learn the art of saving and budgeting so that the fresh start provided by the bankruptcy is not placed at risk.
Source: fool.com, "4 Bankruptcy Myths -- Debunked -- The Motley Fool", Maurie Backman, July 30, 2016