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Bankruptcy myths debunked

New Jersey residents who consider filing bankruptcy may believe that they will lose their home, car and all assets and will never again be able to obtain a debit card. In fact, a Chapter 13 bankruptcy may allow debtors to keep most or all of their assets, and those who file bankruptcy can easily obtain certain types of debit cards.

Chapter 13 bankruptcy allows debtors to reaffirm their debts with secured creditors. Unlike a Chapter 7, debtors may be able to keep their home and car and simply agree to pay the creditors for those assets on a renegotiated payment schedule. Creditors will often agree to lower interest rates or longer terms of payment to enable debtors to make their payments. As long as the Chapter 13 debtor pays on time every month, creditors are usually glad to work with them as opposed to foreclosing on a home or repossessing a vehicle.

Both Chapter 13 and Chapter 7 debtors can obtain a pre-paid debit card immediately after filing bankruptcy. A pre-paid card allows the debtor to deposit money into an account and withdraw it at will for a fee. This can be a good way to rebuild credit after a bankruptcy. Eventually, debtors can apply for unsecured cards again. While the interest rates will often be higher for those who have filed bankruptcy in the past, as time goes on and the debtor continues to make on-time payments, he or she will eventually qualify for lower interest rates.

Bankruptcy can be a way to get a fresh financial start after a job loss, illness or other life-changing event. A bankruptcy attorney could work with a debtor to decide on the most appropriate type of bankruptcy filing for the individual’s circumstances.

Source: Global Grind, “Wisdom Wednesdays with Lynn Richardson: Bankruptcy Myths 2,” Kelsey Paine, March 13, 2013

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