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Dispelling bankruptcy myths

There are a number of misconceptions some Virginians have about filing for bankruptcy and what will happen if they do. Understanding bankruptcy may help people to better understand what they might expect from the process while dispelling their fears and any unrealistic expectations they might have.

Some people have the mistaken idea that they will lose everything that they own if they file for bankruptcy. There are a number of exemptions to bankruptcy outlined in the law. These exemptions exclude certain types of property from being inclusion in the bankruptcy estate, meaning the debtors may keep them. In many Chapter 7 cases, people do not end up losing any of their property.

Others believe that filing for bankruptcy will get rid of all of their debts. There are certain types of debt that cannot be discharged through bankruptcy as a matter of public policy. These include such things as recent tax debts, child support and alimony debt, restitution for criminal cases and others. Student loans are similarly unlikely to be discharged in bankruptcy. While many people think trying to pay off their debts is a better choice, filing bankruptcy may actually be smarter for some people. This is because a bankruptcy can give a debtor a fresh start financially. Credit scores often increase much faster after a successful bankruptcy than if the person tries to pay his or her debts down slowly.

Filing for Chapter 7 bankruptcy may provide a person relief from overwhelming debt. When a debt is discharged, the creditor may not engage in any further collection activities, including making harassing phone calls, proceeding with filed lawsuits or continuing garnishments. People who are overwhelmed by their debts may want to talk to a bankruptcy lawyer in order to decide whether or not the process might be the right answer for them.

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