There are many common myths going around in a lot of uninformed circles about what filing for bankruptcy is all about. One of the most common is that by filing for bankruptcy you’ll lose everything you have. However, nothing could be further from the truth.
No, You Won’t Lose It All
By filing for bankruptcy, you won’t go broke! This is certainly one of the worst bankruptcy myths. By filing, you are seeking legal protection. The bankruptcy process exists for those who can’t afford to pay their creditors in full. The courts won’t drain you of every last cent when you can’t pay back your creditors anyway.
Let’s look at a real-life example here. Let’s say you’re a potter by trade, and you own an expensive piece of equipment that is worth about $2,000. In order to continue making your living in pottery, you need this piece of equipment. These tools usually cost about $1200 to $4000, meaning your particular piece is middle of the road. The courts will not take this away from you.
But, if the average price for a piece of equipment that does the same task was around $400, then the courts might seize your $2000 piece of equipment, sell it off to repay creditors, and then reimburse you $400 so you could by a cheaper replacement.
While laws vary between states, the same principle applies to houses, cars, household goods, and other essentials. You won’t lose it all. If this or other bankruptcy myths have been holding you back from filing, you might want to reconsider!