BANKRUPTCY MYTHS:
1. You lose your home in a Bankruptcy;
2. You lose your personal property (stuff) in a Bankruptcy;
3. Its really bad to file Bankruptcy & is a stain;
4. It ruins your credit to file Bankruptcy.
THE TRUTH:
1. In a Chapter 13, if you are behind on your house payments, you can get caught up over time and keep your house. In a Chapter 7, if you are current, you are allowed to keep your home in almost all cases. Only in cases where you have non-exempt equity in the home, and you don't compensate the unsecured creditors, will you possibly lose your home. You will have the choice to file (and under which Bankruptcy Chapter), or not to file, in those circumstances. In Tennessee, each debtor is entitled to a homestead exemption (equity, after expenses of home sale) of between $5,000.00 and $25,0000.00 per debtor. Most people pay for their house through a Chapter 13 if they are behind, or reaffirm on their house in a Chapter 7. In this market; most folks do not have non-exempt equity in their home worth liquidating for the unsecured creditors in a Chapter 7.
2. Each debtor is entitled to keep at least $10,000.00 in resale value (garage sale value) in personal property; you are also allowed to keep up to $1,900.00 in tools of the trade (per debtor); an unlimited value in clothing; and unlimited qualified retirement accounts and 401k's, etc.
3. Most folks are able to rebuild their credit reputations very rapidly. You cannot be fired from your job because of Bankruptcy. Bankruptcy ultimately derives from the Bible jubilee of the Old Testament where debts were forgiven every 7 years (you can file a Chapter 7 once every 8 years).
4. Your credit should start improving after you file Bankruptcy. If you have delinquent accounts, and you do not have the ability to pay them off, your credit will never improve; that is when you want to file Bankruptcy. Once you file, you will be compared to other people who have filed Bankruptcy (with respect to your credit score which in itself can give rise to a higher score). Most importantly, if you make your rent, or other secured payments on time, you will start improving your credit score rather rapidly.
