Chapter 7 bankruptcy offers individuals overwhelmed by debt a fresh start. However, misconceptions often surround this legal process, leading to confusion and misinformation. Today, we will be debunking some of the most common misconceptions regarding Chapter 7 bankruptcy, empowering individuals with accurate knowledge and dispelling myths associated with this debt relief option. If you are considering filing for Chapter 7 bankruptcy, contact an experienced bankruptcy attorney to ensure you receive the critical legal guidance you need during this trying time. 

Losing Everything

One significant misconception is that filing for Chapter 7 bankruptcy means losing all assets. In reality, exceptions exist to protect certain property types, such as essential household items, a vehicle, and in some cases, even your home. Understanding the exemptions available in your state is crucial to safeguarding your assets throughout the process. 

Public Stigma

Many people believe that filing for bankruptcy will result in social judgment or stigmatization. It is important to note that bankruptcy laws are in place to provide individuals with a second chance and a fresh start. While bankruptcy filings are public records, the stigma associated with this process has significantly diminished over time.

Many people who file for bankruptcy believe that they will never be able to get any kind of credit in the future. They believe that things like a new car are out of reach. It is possible to get car loans after bankruptcy, but you will need to pay more for it. A Geneva bankruptcy lawyer can advise you of the potential effects of declaring bankruptcy and what could happen in the following years. 

You Can Get Some Types of Credit

In general, bankruptcy will remain on your record for seven years after the process concludes. The bankruptcy will continue to affect your credit. Immediately after the debt is discharged is when there will be the highest impact. Most lenders will decline for traditional auto loans because of your credit. However, the more time passes after your bankruptcy, the more the impact will diminish. It may be possible to get a traditional car loan several years after your bankruptcy.

There are some lenders that will work with people who have recently emerged from bankruptcy. However, the interest rate that they charge will reflect the risk of a lower credit score. You can expect to pay at least several points higher for the interest rate. That could put a new car out of your price range. Nonetheless, the perception that you are completely shut out of the car loan market is not entirely correct. 

Finding out that you are being sued by a creditor for unpaid debt can be extremely upsetting. Many people with debt try their best to repay it, but life circumstances and unexpected financial obligations get in the way. If you are being sued by a creditor, you may understandably worry about the consequences. Lawsuits like these can lead to wage garnishment, property liens, the seizure of assets, or other measures to collect the debt. Many people in this situation wonder whether they should file for bankruptcy.

Will Bankruptcy Stop the Lawsuit?

When someone files for bankruptcy, an "automatic stay" is issued which stops any collection efforts. This means that all debt collection activities must be ceased, including most lawsuits. Creditors cannot garnish wages, seize assets, or otherwise attempt to collect the debt until the bankruptcy case is concluded. Therefore, filing for bankruptcy often provides immediate relief from creditors and lawsuits - with a few exceptions. In some cases, a creditor can ask the bankruptcy judge to remove the automatic stay and allow them to proceed with their lawsuit.

Bankruptcy cases are complex and there are many different factors that influence whether bankruptcy will prevent legal action against a debtor. This is why it is so important to seek professional legal advice. An experienced bankruptcy attorney can help you determine if filing for bankruptcy will provide the relief you are looking for and how it would affect any existing lawsuits.

There are a lot of different reasons that people ultimately choose to declare bankruptcy. Anything from a single unexpected medical emergency to a patch of unemployment can quickly cause a person to rack up debt they will not be able to pay off. Bankruptcy is based on the idea that people deserve a fresh start and there should be a way out of insurmountable debt. However, it is important that bankruptcies are handled correctly so that they do not lead to more legal issues. 

Mistakes during bankruptcy can cause further financial difficulty rather than relieving financial strain. It is quite easy to slip up and make a potentially costly mistake. Your best bet is to have your bankruptcy handled by an attorney. 

What Mistakes Should I Avoid When Declaring Bankruptcy?

Bankruptcy can be a very delicate legal procedure. Everything needs to be done correctly and in good faith. Some common mistakes people make during bankruptcy proceedings include: 

If you are considering filing for bankruptcy, you may feel like you have very little control over your financial life or the bankruptcy process. This is not entirely true - people who file for bankruptcy in Illinois still have options. For most personal bankruptcy situations, there are two different types of bankruptcy your attorney will discuss with you to help you choose the best option. Chapter 7 and Chapter 13 bankruptcy filings can both lead to a new, debt-free life, but in different ways. Both types have benefits and drawbacks. The type of bankruptcy that will make the most sense for you will depend on your personal situation and preferences. It is important to speak with a lawyer to make sure that you have a complete understanding of how each type of bankruptcy will affect you. 

What Happens When I File for Chapter 7 Bankruptcy?

Chapter 7 bankruptcy can create a quicker and cleaner path to freedom from debt, but the major drawback is that your assets will be liquidated. When you file for Chapter 7 bankruptcy, the court will appoint a trustee. The trustee will then be responsible for identifying your assets and selling them off in order to pay off your creditors as much as possible. 

It is relevant here that not all of your property is subject to liquidation - there are statutory exemptions so that you can keep some personal property. An attorney can give you a better idea of which of your assets are or are not exempt. The benefit is that after liquidation, the rest of your eligible debt is forgiven, and you are free to start a new, debt-free life.