Myth: You’ll lose everything
A deterrent to filing for bankruptcy for many people is the misconception that they will lose everything they own. In fact, in the vast majority of Chapter 7 cases, the filer gives up no personal possessions. This is because they are usually filed as no-asset cases, which allows the filer to make “exemptions” for the possessions that he needs in his daily life. Many other possessions are simply not valuable enough for creditors to bother coming after.
Under Chapter 13, you can keep all of your assets, but their value may be figured into your repayment plan.
Myth: This will ruin your financial future
It’s true that your credit score will take a hit and your access to credit will diminish briefly when you file for bankruptcy. However, the damage to your score is not irreparable and the diminished access to credit doesn’t last forever. Not filing, oftentimes, can continue to make debtors appear to be a credit risk. By filing, you are getting a fresh start and are able to rebuild your credit.
For filers of Chapter 7, the bankruptcy can remain on your credit report for up to 10 years. For filers of Chapter 13 it can remain up to 7 years. But you can start rebuilding your credit and improving your score immediately after filing. One option is using a secured credit card. These are usually small amounts of credit: $500 to $1000 for example and are generally available for people who have recently filed bankruptcy. As you use the card responsibly and continue to make smart financial decisions, you will likely see your credit steadily grow. Eventually, you can attain an excellent credit score and regain access to a full range of credit options.