Many people successfully declare bankruptcy each year and regain their financial freedom. However, complex laws and numerous misconceptions still create quite a bit of confusion about the filing process. This can make it challenging to determine if bankruptcy is the right option for your particular situation if you are facing insurmountable debt.

Common Misconceptions Associated With Filing Bankruptcy

1. You Will Lose Everything You Own 

In a Chapter 7 bankruptcy, you may be required to liquidate some assets as a way of paying back your creditors a portion of the debts you owe. As such, there is a chance of losing property. However, most states have a long list of exemptions that are meant to protect certain assets from being sold. Typically, debtors can keep the majority, if not all, of their possessions. This concern doesn’t apply to Chapter 13 bankruptcies, as liquidation is not part of the filing process. 

2. Your Credit Will Be Damaged Beyond Repair

People often hesitate to file bankruptcy because they’re afraid of how it will impact their credit rating. While you can expect your credit to be affected, filing will allow you to begin improving your score. If you have been struggling to meet your financial obligations, it’s likely your rating has already dropped. Once your bankruptcy is discharged, there are several steps you can take to start rebuilding your credit right away.

3. All of Your Debts Will Be Forgiven 

Declaring bankruptcy will not eliminate all of your debts. Chapter 7 bankruptcies only discharge unsecured debts, including credit card bills, personal loans, and medical expenses. This means you will still be responsible for paying any secured debts you have, such as back taxes, student loans, child support, alimony, and court-ordered judgments. Under a Chapter 13, you must put together a repayment plan that allows you to pay back your debt within three to five years. 

Armed with the truth, you can confidently decide if bankruptcy is the best solution for your financial situation. The legal team at O’Connor, Mikita & Davidson will help you separate fact from fiction and explore your debt-relief options in depth. Backed by more than two decades of experience, they have been entrusted to guide countless Cincinnati, OH, residents through the bankruptcy process as they look to retake control of their finances. Call (513) 793-5297 to schedule a free consultation, or visit their website for more information on the services they offer.