Think you know everything there is to know about bankruptcy? Here are five surprising facts about bankruptcy that surprise most people.
Bankruptcy is a big decision with a lot of implications. It’s not something to be taken lightly. If you are considering bankruptcy, it’s important to do your research and understand all that bankruptcy entails.
Here are five things you may be surprised to learn about bankruptcy:
1. Bankruptcy Can Be Good for Your Credit Score
You might think that filing for bankruptcy would ruin your credit score. Surprisingly, it could actually help your credit score over time.
Bankruptcy stays on your credit report for up to 10 years, but that doesn’t mean your credit score will suffer for 10 years. After filing for bankruptcy, you can begin to rebuild your credit score by making timely payments on any debts you still have and by using credit wisely.
2. Not Everyone Who Files for Bankruptcy Has Their Assets Seized
When you file for bankruptcy, the court appoints a trustee who oversees your case. The trustee reviews your assets and determines which assets are exempt from seizure. Exemptions vary from state to state, but they typically include things like your home, your car, and your retirement savings.
3. You Might Not Have to Give Up Your Home or Your Car
Even if the trustee overseeing your case determines that some of your assets are subject to seizure, you might not have to give them up. If you can show that selling those assets would cause undue hardship, the court might allow you to keep them.
4. Bankruptcy Might Not Discharge All of Your Debts
While bankruptcy can give you a fresh start by discharging many of your debts, it won’t get rid of all of them. Some types of debt are not dischargeable in bankruptcy. This includes:
- Student loans
- Child support payments
You will still be responsible for repaying those debts even after you file for bankruptcy.
5. Filing Jointly Can Protect Your Spouse’s Finances
Depending on the type of bankruptcy you file—Chapter 7 or Chapter 13—filing jointly with your spouse might protect their finances from being included in the bankruptcy proceeding.
Chapter 7 bankruptcies are known as liquidation bankruptcies because they involve the sale of some of your assets to pay off your debts. If only one spouse files for Chapter 7 bankruptcy, the court might not consider the other spouse’s income when determining whether the debtor has enough money to pay off their debts.
This varies from family to family, so speak to your bankruptcy attorney about the best way to file if you’re married.
These are just five things you might want to know before deciding whether or not to file. Of course, there is much more to know about bankruptcy and its implications. If you are considering bankruptcy, it’s best to consult with an experienced bankruptcy lawyer who can answer your questions and guide you through the process.