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Know the truth about bankruptcy

Bankruptcy is often the option of last resort. When people become overwhelmed by debt to the point they are drowning in financial obligations; sometimes bankruptcy may be the only viable solution.

There are some common myths associated with filing for bankruptcy. Many people believe they will lose everything they own by pursuing this form of debt relief. In reality, the vast majority of Chapter 7 cases are no-asset cases. Filers don't often have to give up anything because they own so few assets.

When a person files bankruptcy, there are certain exemptions that they can declare for essential assets. What they can claim varies by state. Most of the items that you have which might not fall under the exemption won't likely interest your creditors, e.g., your teddy bear or video game collection. However, if you have a vintage vehicle in your garage, then be prepared to say good-bye to it.

Unfortunately, not all debts are dischargeable in bankruptcy (think student loans). You'd have to demonstrate extreme hardship, which is a very high burden to meet, to have these discharged.

Another common misconception people have is that paying off debts is a better option than filing bankruptcy. That varies by case. If your debts add up to more than 50% of your annual income and the chances of paying off what you owe in the next five years are slim to none, then bankruptcy might make sense for you.

If you are considering filing bankruptcy, then it's essential to understand the pros and cons associated with doing so. It may help you get back on your feet by filing for bankruptcy; however, this form of debt relief isn't appropriate for everyone. An experienced bankruptcy attorney can evaluate your case and let you know how to put the law to work for you.

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