In the society we live in, it is increasingly difficult to avoid debt. If you have high amounts of debt, then it's wise to understand exactly what your options are for getting out of debt. The word "bankruptcy" has gained a bad rap over time. But bankruptcy isn't all that bad. In fact, it's time to set the record straight about what exactly happens when a person files bankruptcy. Here are three of the most common misconceptions about Kentucky bankruptcy.
1. You have to be flat broke. False! Many people who file for bankruptcy still have an income, but they have less income than the amount of money required to cover all the bills that need to be paid. There are state regulations that actually prohibit individuals who are "flat broke" from filing for bankruptcy. For example, in New York, a person must have either $2,500 cash or $2,400 in equity from some type of property.
2. Your credit is going to be ruined forever. This simply is not true. Yes, your credit record will show that you filed bankruptcy for a few years, but it eventually disappears. And ultimately, you make yourself a better candidate to receive credit because you have less accumulated debt after the filing.
3. You automatically lose your house. Yes, some people do lose their house through bankruptcy, but isn't always the case. A smart route to take to avoid losing a house is to file Chapter 13 instead of Chapter 7 whenever possible. Although the process is a little more complex, individuals are able to keep their property instead of liquidating it to pay off creditors.
While these are only a few misconceptions about the effects of filing bankruptcy, hopefully we've shown that filing bankruptcy is a smart decision for many people. And it certainly isn't the end of the world!