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Bankruptcy protection gives struggling Debtors an opportunity to wipe the slate clean and get a fresh start. Unfortunately, many people who qualify hesitate to seek debt relief, because of common myths and misconceptions about the Bankruptcy process. Below are some common misunderstandings you might have about filing for Bankruptcy.

Debunking Common Bankruptcy Myths

1. The Trustee Will Seize All of Your Assets

In a Chapter 7 bankruptcy, the Trustee has the authority to seize non-exempt assets and liquidate them to repay creditors. However, each state allows you to exempt a variety of assets, and most Debtors’ assets fall within those exemptions.

New York allows Debtors to choose between the Federal exemptions or those allowed under state law. The state exemptions include up to $150,000 in home equity, depending upon the county where you live, as well as tools, clothing, and even wedding rings.

The Federal exemptions, while not allowing as much home equity, include a “wildcard” exemption that allows you to exempt property that might not be exempt under State Law.

Your attorney will help you choose the exemptions that best fit your case.

2. Your Credit Will Never Recover

bankruptcy

While filing for bankruptcy protection does cause a drop in your credit rating, the overall damage is likely less than repeatedly missing payments and having accounts sent to collections and/or lawsuits, garnishees, etc.

In fact, many Debtors find they can finally start rebuilding their credit once the weight of burdensome debt and collection actions has been lifted. With financial discipline, you can qualify for a low credit line or secured credit card in just a few months, and should be able to purchase a car, albeit at higher interest rates for the loan, almost immediately if you need to.

In many bankruptcies, Debtors “reaffirm” on their cars, meaning they sign an Agreement with the lender to continue to make payments in exchange for the lender not repossessing the car.

3. Bankruptcy Can Prevent Foreclosure

Chapter 7 bankruptcy is largely designed to eliminate unsecured debt, so while it can stop a mortgage foreclosure temporarily and ultimately discharge the mortgage debt, the mortgage lender is always entitled to eventually recover their collateral. However, you may be able to file for Chapter 13 bankruptcy, which allows you to make up past due mortgage payments and prevent foreclosure. As long as you continue making the bankruptcy payments, and your regular mortgage payments, the lender cannot foreclose. Your attorney will advise you if this form of Bankruptcy is feasible. You must have steady and regular income.

For nearly 40 years, Thomas A. Corletta, Attorney & Counselor at Law has helped Rochester, NY, Debtors get their feet back on the ground. He prides himself on working directly with each client, so you’ll only have to discuss your case with him. Visit his website for more on his bankruptcy services, or call (585) 546-5072 to arrange your initial consultation today.

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