Bankruptcy: Keeping It Real

In this tough economy, so many people are struggling to pay all their bills, and there is a lot of fear about losing homes among those who have lost employment or had hours cut back. It seems that almost everywhere you turn, there are advertisements about "eliminating your debt." It's time to sort out the fact from fiction regarding debt relief and filing bankruptcy. The option you choose can impact your life for years to come.

One piece of fiction that many people in need of debt relief worry about, and needlessly procrastinate over, is the possible social stigma of the debt relief proceedings. In the case of celebrities and public figures publicity is almost inevitable, so it is a legitimate concern for them. But the vast number of filings becomes known only to the affected creditors in the process.

If you go through some form of bankruptcy, will this eliminate all your debts? Your attorney can determine whether your financial circumstances meet the current means test for making debt repayments through Chapter 13, a wage earners plan, or if a Chapter 7 filing is more appropriate for you. Both the Chapter 7 and Chapter 13 filings contain many types of debt elimination exclusions such as child support, criminal restitution, and tax liens.

Another area that is rife with fiction is that you will lose your house. Both Chapter 7 and Chapter 13 forms of bankruptcy often allow you to keep your current home. In fact, a Chapter 13 filing, in some instances, is initiated specifically to help homeowners prevent foreclosure. This is an area where you want an experienced bankruptcy lawyer handling your Chapter 7 and Chapter 13 filings and advising on your case in order to protect your assets to the full extent of the law.

Regardless of the claims you hear on TV, radio, or on the internet, debt relief, whether settling your debts with creditors through negotiating down the balances, or filing for some form of bankruptcy, will impact your credit score. It is fiction that after filing a bankruptcy, your reduction in debt will improve your credit score. The credit bureaus maintain records of all your credit transactions, some for 7 years, some for as long as 10 years. Your credit score will drop, perhaps significantly, after a bankruptcy is filed, and most creditors will show negotiated credit payoffs as "PAID SETTLED" which will also lower your scores.

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