Important truths about bankruptcy

Minnesotans contemplating bankruptcy should get the facts about how it can and cannot help them.

Many residents in Minnesota who struggle with unmanageable levels of debt often feel hesitant to seek relief via a personal bankruptcy. This is because of things they hear or read from friends, colleagues or through other sources. Sadly, many of these things are simply not true yet they deter debtors from getting the help that they so desperately need.

Before deciding that bankruptcy is not a good option or that is may be right, people are encouraged to do some more homework. It is important to really understand the facts about bankruptcy and some of what they have heard. Following is important information that clarifies many of the topics about which confusion is common.

Post-bankruptcy mortgage opportunities

Despite doom-filled statements from many supposed experts, it is possible to qualify for a new mortgage even with a prior bankruptcy on record. According to The New York Times, consumers may need to provide more details and information than they would if they had not filed bankruptcy. This allows banks to more fully assess applicants' current situations versus their situations at the time of their bankruptcy filings. Being able to show a positive difference can aid in obtaining a mortgage.

Saving and losing homes in bankruptcy

Some consumers choose to file a Chapter 13 bankruptcy because it is known to provide protection for homes. These plans are essentially a structured repayment of debt that consolidates payments. This makes it possible for debtors to keep up with mortgage payments and avoid losing homes.

However, it is also possible to save a home when filing a Chapter 7 bankruptcy. This can be done if the amount of equity in a home falls within the guidelines of the allowed exemptions.

Bankruptcy is not for all debt

It might be wonderful for debtors if any type of debt could be handled in a bankruptcy but that is not possible. According to the American Bankruptcy Institute, things like student loans, child support and alimony fall outside the scope of any type of bankruptcy. Other debts that a person might have from fraudulent or criminal actions will also be unable to be absolved by or included in a bankruptcy.

Credit reports still show debt

Even when a debt has been discharged in a Chapter 7 bankruptcy or a Chapter 13 bankruptcy, it can still appear on a credit report. The notation will indicate its discharged status but it will not be magically erased from record.

Always ask questions

Perhaps the best advice for anyone thinking about bankruptcy is to ask questions. Talk to an experienced bankruptcy attorney to find out the facts and identify how to get the help you need.

Keywords: bankruptcy, mortgage, credit report