The truth about personal bankruptcy

No one likes to talk
about bankruptcy, but if you’re
considering bankruptcy, you really need
to know the facts. There are two types of
personal bankruptcy, Chapter 7 and Chapter 13. They each offer
different protections depending on individual
circumstances. In general, Chapter 7
is total liquidation of unprotected assets
to pay creditors. And Chapter 13 allows
for individuals to create payment plans with
creditors usually over the span of three to five years. There are also a few
myths surrounding the filing of bankruptcy
that you should be aware of. The most common myth is,
people who file bankruptcy are irresponsible. Actually, some of the
most common reasons people filed bankruptcy are
medical expenses, job loss, and divorce. Most people who
file for bankruptcy aren’t gaming the
system; rather, they’ve encountered very serious
financial problems and need to get out from
underneath the unrecoverable debt. Another common myth is,
bankruptcy permanently ruins your credit. Most creditors will be
cautious when extending credit to filers of bankruptcy,
but there will still be secured credit
card offers available, and these can be the first
step in rebuilding your credit. If you choose this option, make
sure you pay your credit card debt on time and demonstrate
creditworthiness. Then there is the myth
that filing for bankruptcy is inexpensive or even free. Filing fees alone for bankruptcy
costs hundreds of dollars. And if a lawyer is retained to
help you with the bankruptcy, your costs can climb
to more than $1,000. Finally, there is a myth that
bankruptcy is a cure-all. Bankruptcy is not a
short-term solution, and it can’t discharge
all debts owed. For instance, child support,
certain taxes, or most student loans still have to be paid. Before deciding to
file for bankruptcy, contact your local branch and
schedule a financial counseling session offered at
no charge to members. It’s best to have
a good grasp on your entire financial
situation before making such a big decision. LGFCU is an equal housing
opportunity lender and federally insured by NCUA.

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