When something unexpected happens that causes you to become overwhelmed with debt, bankruptcy might be a good option. Bankruptcy allows you to discharge your qualifying debts and start over or set up a payment plan to pay off your debts.
Bankruptcy can be a wise financial decision. Unfortunately, misconceptions around bankruptcy can cause you to put off filing for bankruptcy.
You may have received advice and opinions from family or friends on bankruptcy which are inaccurate or incorrect. Before deciding if bankruptcy is the right option for you, it is important to have correct information about bankruptcy and how it works in Maryland.
You will lose all your property
You will not always lose your home or all your property if you file for bankruptcy. If you go through Chapter 13 bankruptcy, you will pay off your debts according to a 3 to 5-year payment plan, which typically enables you to keep your home and any other assets.
Additionally, there are exemptions that allow you to keep many of your assets, including a home, personal property and retirement accounts.
Your credit is permanently ruined
It is true that bankruptcy will affect your credit score, but it will not permanently alter it. You will see a drop in your credit score immediately after filing but you can start rebuilding your credit as soon as you file. After the initial drop, you may see your credit score improve after a year or two.
Additionally, bankruptcy generally only appears on a credit report for 10 years after Chapter 7 bankruptcy and seven years after Chapter 13 bankruptcy.
Although bankruptcy will make obtaining credit more difficult for a while, getting credit is not impossible. There are lenders who focus on working with individuals who have filed for bankruptcy.
Your spouse must file if you do
One spouse can file for bankruptcy without the other spouse. Depending on your situation, it might make more sense for you to file but not your spouse, or vice versa. One spouse’s bankruptcy filing does not typically affect the other spouse’s credit, whether it is Chapter 7 or Chapter 13 bankruptcy.
While bankruptcy does involve completing certain steps and following specific rules, it is not a complicated process. It is normal to feel confused and overwhelmed by the rules, filing for bankruptcy is not so difficult that you should avoid gaining the benefits that filing can provide.
You are bad with money
Finally, bankruptcy is not a sign that you are a financial failure or lost money through your own fault or actions. Bankruptcy is often viewed as a sign of financial irresponsibility or personal failure and that is far from true.
Some typical reasons for filing for bankruptcy that have nothing to do with personal failings include a job loss, divorce or medical emergencies.
Divorce or separation usually means adjusting to one income instead of two, which makes manageable debt become unmanageable. Medical emergencies often result in unexpected debt that quickly piles up.
The need to file for bankruptcy can happen to anyone. Bankruptcy should be viewed as a fresh start and taking advantage of legal protections, as well as a chance to rebuild your credit and regain financial stability.