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Thursday, February 19, 2009

Bankruptcy: some misconceptions you should stay away from (1)

We all know that the event of filing bankruptcy is scary enough. Bankruptcy carries several misconceptions along with. If you have got a heavy burden of debt on your shoulder, you should first look for some other alternatives for setting yourself free from debt problem; bankruptcy should be your last option. But if other doors are not open for you, you have to face bankruptcy. However, some of us do have some wrong myths and misconceptions about the entire process of bankruptcy for which they often face lots of financial problems and hassles in the long run.

I would like to share a relevant list of such misleading ideas about bankruptcy that many debtors among us often come come across with:

• Filing Bankruptcy happens only once
Within a short time span, one cannot file for bankruptcy twice. Many debtors file for Chapter 7 bankruptcy at 6 years interval. Of course one can file for Chapter 13 more often than Chapter 7. But neither it is recommended, nor it looks ideal. The reason: filing more than one bankruptcy often damages your credit rating seriously and destroys your chance of getting lower interest rate loans in future.

• It is impossible to get credit again
The negative impact of a bankruptcy event lasts on a credit report for 7 to 10 years. So most debtors who have filed for bankruptcy think that their credit can’t be regained for that time period….so they can’t avail any loan for a long time. But it is not totally true…for you, mortgage loans or car loans are still available, though a bit difficult to get and the interest rates are higher for you. Those lenders offer sub prime loans at very high interest rates.
You can get offers of credit card too. Here are some essential points on credit card : suppose on the day of filing your bankruptcy, you have a credit card with zero balance; as you don’t have any payable debt on it, no need to include that in your list of filing. Even you are free to work on payment of any unpaid debt while you are filing, though this is not advisable to do so at that moment.

• Bankruptcy filing is very hard
This is a completely wrong conception that filing for bankruptcy is a tough, tedious and complicated job. Rather, the truth is that often filing a bankruptcy can be successfully and hassle-freely done without even seeking help of an attorney-though it is always recommended to have a prior consultation with him about the legal aspects to set yourself prepared before you proceed further.

• Chapter 7 bankruptcy is the one-stop solution for all debts
Certain kinds of unpaid debts are there which cannot be eliminated by filing Chapter 7 bankruptcy petitions. Debts which are not covered by chapter 7 are:
1. alimony.
2. child support expense
3. Fraud related debts.
4. Unpaid student/education loans.
But, many of the debtors belief strongly in this wrong idea that Chapter 7 bankruptcy can remove their each and every unpaid debt.

There are some other misleading thoughts in market regarding bankruptcy which i shall discuss about on next day in the 2nd part of this topic.


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