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Two Most Common Misconceptions about Chapter 7 Bankruptcy

If you have landed to this page, the chances are that you have certain misconceptions about chapter 7 bankruptcy and you need some clarification. You are not the only one; many people make bad decisions just because they have some false assumptions. For example, there are people who look at it as an easy option to deal with the rising debt problems. At the same time, there are also people who think bankruptcy is a frightening condition and that there is no life after you are declared bankrupt. In either case, they have certain misconceptions. Following is a brief rundown on two most common bankruptcy myths, especially when it comes to filing under chapter 7.

Chapter 7 Bankruptcy does Not Wipe out All Your Debts

The most common misconception about chapter 7 bankruptcy is that it is an easy option to eliminate “all your debts” and to start your financial life afresh. It is a false assumption. Though you do get an opportunity to start a fresh financial life; all your debts are not wiped out when you are declared bankrupt under this chapter. It is important to note that the laws prohibit discharge of certain debts, such as the debts incurred as a result of fraud and student loans granted by state or federal government. Besides that, liabilities like alimony or child support are also not discharged. The chances are that even legal settlements that you are liable to pay will also not be discharged by the court. For example, if you have been order to pay someone a certain amount of money as personal injury claim settlement, this will still be a liability on you even after the court declares you as bankrupt.

You will Not Lose Everything You have

Just because you have become bankrupt, it does not mean that this is the end of life for you. You are not going to lose everything that you have. It is due to this misconception about chapter 7 bankruptcy why many people who really should file for it hesitate to do that. In reality, the government or the appointed trustee is not going to sell everything that you have. The laws have made room for certain exemptions. Though the exact details of such exemptions vary from one state to another, the key point is that it is made sure that you are left with enough things at your disposal so that you could fulfill your basic needs even after bankruptcy and give a fresh start to your financial life.

Always remember, unpleasant surprises occur only because of lack of awareness. Your misconceptions about chapter 7 bankruptcy can prove costly to you, making things more complicated, adding more hassles to your existing database of worries. So, get your facts rights.

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