Know the facts about bankruptcy

| Feb 13, 2020 | Bankruptcy

Many people might think that filing for bankruptcy is the worst thing they can do for their finances. However, some of the information people think they know about bankruptcy does not match the facts. When people are in a dire financial situation, it is important for them to understand how bankruptcy really affects their finances and personal possessions.

People may be reluctant to file for bankruptcy because they think this option will permanently destroy their credit. According to Market Watch, bankruptcy does not have a permanent effect on credit. This financial option is usually on a credit report for about 10 years. Most of the time, people have a decreased credit score immediately after their bankruptcy. However, within a few years, many people can rebuild their credit when they practice good financial habits. Additionally, people sometimes think bankruptcy will keep them from getting a loan. However, there are several different types of loans available to people after bankruptcy.

Sometimes people may want to avoid bankruptcy because they see it as a sign of financial failure. NerdWallet says it is important to remember that bankruptcy is a financial solution. People may experience financial difficulties for many reasons. While some people may realize they did not manage their money well, others might struggle to pay off medical bills. It is important to understand that bankruptcy is a tool to help people regain financial solvency.

Additionally, people might think that they will lose all of their assets during bankruptcy. However, people can usually keep many of their possessions. If people file for Chapter 7, for example, they can list certain assets as exemptions. This means that people may be able to keep their house and their car. It is important to remember that these exemptions have to meet the requirements of Kentucky law. It is a good idea to do some research so people know which assets qualify as exemptions.