No one enjoys the thought of filing for personal bankruptcy protection. There is a fear of social stigma connected with filing, even though in most cases very few people would ever know that the bankruptcy ever existed.

Making matters worse, anyone considering bankruptcy as a solution to their debt problems has to deal with a proliferation of mistaken and misleading notions about bankruptcy. These myths, old and new, cloud the real financial issues and distract debtors from arriving at genuine solutions to their monetary problems.

Here are some of the harmful myths about bankruptcy that commonly confuse people.

When you file for bankruptcy, you lose everything.
This is virtually never the case. In a Chapter 13 reorganization, the debtor keeps all of their assets and pays off their debts under a long-term payment plan. Chapter 13 is usually used by debtors who have a steady income. If a debtor opts for Chapter 7 liquidation, there is likely to be a sale of assets, but even then there are some basic items that are exempt from liquidation. This usually includes a home, a car, some personal items, etc., up to a certain value. (A Fort Lauderdale Chapter 7 bankruptcy attorney can advise you on what property would be exempt.) The bankruptcy court never leaves someone with absolutely nothing. Bankruptcy is supposed to give the debtor a fresh start. That would be hard to achieve if the debtor was deprived of absolutely everything they have.

In the next post, we will examine some of the other harmful myths surrounding bankruptcy.

Source: SF Gate "5 Myths About Personal Bankruptcy" 5/5/2011