Many consumers in Cleveland and other parts of Ohio continue to struggle every month to make ends meet and to pay off debt. The burden that continuing high debt, often compounded with late fees or high interest rates, can place on people is great. A Chapter 7 bankruptcy or a Chapter 13 bankruptcy can offer solid legal relief and the ability to start fresh but many consumers are hesitant to consider these plans. This is often because of misinformation.
It is important to take the time to learn the facts about bankruptcy and how it can truly help. Below is the truth about five common bankruptcy myths to help consumers navigate the complex world of discharged debts, repayment plans and more.
Not all homes are lost in Chapter 7 bankruptcies
One of the most commonly held beliefs about a Chapter 7 bankruptcy is that every home will be lost in this plan. Forbes indicates that this is not true. While certainly this can and does happen, the law includes what is referred to as a homestead exemption that can prevent this from happening in some situations. The exemption allows consumers to retain assets up to a certain dollar value. If a debtor's home value is less than the allowable limit, the home may be able to be saved.
Mortgages are possible post-bankruptcy
The New York Times gives hope to people who believe that they will never be able to apply for a mortgage again if they file for bankruptcy. Some time may be needed to rebuild credit but the path to future home ownership is available even to people who have experienced a bankruptcy. One of the important elements in these situations is the ability to offer details about the reasons for filing bankruptcy and how any current situations are different.
Debts are not eliminated from credit reports
Debts may be discharged in a Chapter 7 or properly paid through a Chapter 13 bankruptcy but they will still be viewable on all credit reports. The reporting will indicate the payment status via bankruptcy but consumers should be prepared to reference these in any future credit application situations if need be.
A bankruptcy cannot clear all debts
According to the American Bankruptcy Institute, there are some types of debt that a bankruptcy cannot include. Among these are alimony payments, child support payments and student loans. Debts that are assumed due to criminal or fraudulent actions are also outside of the scope of a bankruptcy.
Bankruptcy of a co-signed can affect a debt
The Huffington Post indicates that people who have co-signers on loans, such as student loans, can be affected if their co-signers file for bankruptcy. In some cases, the entire balance of the student loan can become due. Being aware of this can help to avoid an unnecessary situation.
These are just a few of the details surrounding bankruptcy options. Chapter 7 and Chapter 13 plans each offer unique features and understanding them is important.
What Should Debtors Do?
If debt becomes too much to handle, a debtor is urged to talk to an experienced bankruptcy lawyer. Getting the right legal help can make a big difference in finding a way out of debt.