Bankruptcy Basics

5 Common Chapter 7 Bankruptcy Myths

Posted by Craig Black | Jan 20, 2025 | 0 Comments

Chapter 7 bankruptcy is a big step, but it can be exactly what some consumers need. Unfortunately, too many people hesitate to file because of preconceived notions about what Chapter 7 means. With so many myths surrounding bankruptcy protection, it's important to get the truth before you rule it out altogether. We've debunked five of the most common myths to get you started.

If you're considering filing for Chapter 7, I can answer any questions you have. Give the Craig Black Law Firm a call at 678-888-1778 to speak directly to me, or complete this contact form.

Myth #1: Bankruptcy Permanently Ruins Your Credit

Bankruptcy does hurt your credit, but the impact is only temporary. Yes, Chapter 7 bankruptcy remains on your credit report for 10 years, but its impact will diminish over time. You can work on paying bills on time and monitoring your score to watch your credit gradually improve.

Myth #2: Chapter 7 Means Losing Your House

Surrendering your home can be a way to get out from under unmanageable payments, but it isn't a requirement. Chapter 7 comes with a homestead exemption that allows you to stay in your home, provided you've achieved a minimum amount of equity. Requirements vary by state, so it's important to research it before you file.

Myth #3: Both Members of a Married Couple Must File

If you're married, it's natural to assume you'll have to file for Chapter 7 protection together. Not only is that not the case, but it sometimes makes more sense to file alone. Keep in mind, though, that if the debt goes with a jointly owned asset, the court may seize it. Consult an attorney to determine whether filing jointly or separately is the best option for you.

Myth #4: Bankruptcy Is a Failure

At one time, bankruptcy came with a stigma, but that isn't the case anymore. In fact, hundreds of thousands of U.S. consumers file for bankruptcy protection each year. That means it's likely that someone you know has filed. Bankruptcy is a tool to help you get on top of your finances.

Myth #5: Chapter 7 Wipes Out Your Retirement Savings

No, the courts do not empty your retirement savings accounts to pay your creditors. Your 401(k), IRA, and 403(b) accounts will remain intact, as will any pensions. There is a limit, though. If you have more than $1.5 million in your IRAs, you may lose the amount above that in bankruptcy. If you've invested funds for retirement in property or regular savings accounts, you could lose it, though, unless you successfully request an exemption from the court.

The Craig Black Law Firm Touch

At the Craig Black Law Firm, we know you have questions, and I'm here to answer them. We regularly help with Chapter 7 bankruptcy filings and know the ins and outs of the U.S. bankruptcy process. Give me a call at 678-888-1778 or fill out this form, and I'll address any questions or concerns you have.

META TITLE: Chapter 7 Bankruptcy Myths | Craig Black Law Firm

META DESCRIPTION: Chapter 7 bankruptcy protection helps consumers get a fresh start, but misinformation often blocks people from filing. Here are five of the most common Chapter 7 bankruptcy myths.

About the Author

Craig Black

I had never thought much about bankruptcy law, but after graduating from law school, I moved to Chicago. My first job as an attorney was with a law firm that specialized in bankruptcy. Within a few years, I went from being the youngest attorney in the firm to a managing attorney. During my time t...

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