Bankruptcy seems like it's a scary experience, but the truth is that it is a fair process that allows you to preserve at least some of your assets, potentially including your home, your vehicle, your retirement accounts and more. The idea behind bankruptcy isn't to take away everything you have.
There are two main kinds of bankruptcy, Chapter 7 and Chapter 13. Both allow you the benefit of keeping at least a portion of your assets, if not all of them.
Why are people so scared of bankruptcy?
People are often scared of bankruptcy because of the idea that you'll lose everything. However, that's a myth. Even in a liquidation bankruptcy, where you liquidate any nonexempt assets, there are quite a few assets that the court won't touch. Working with your attorney will let you identify those assets and work to preserve them, so that you aren't starting over from scratch after you're discharged from bankruptcy.
Chapter 13 bankruptcy is different, because you make payments to the court for three to five years to pay on your debts. Those payments may be much lower than what you're already having to pay each month, which allows you to feel more secure financially. After you make payments on time for the three- to five-year period, the court discharges additional debts and you emerge from bankruptcy.
Is bankruptcy going to ruin any chance of buying a home or property?
If you already struggled with debt, the likelihood is that your credit score wasn't great. Eliminating debt through bankruptcy can hurt your credit, but your credit will start to improve immediately. The sooner you can show you're a responsible borrower, the sooner your score will improve. Usually, you'll be able to qualify for a home loan, credit and other lending opportunities within a few years, but the exact time frame depends on many different factors, like the type of bankruptcy you chose and how you maintain your credit score moving forward.
Will bankruptcy ruin my retirement?
In Ohio, any ERISA-qualified account is exempt from bankruptcy. That includes IRAs and 401k accounts, so you should not have any issue retaining a qualified retirement account.
If you're putting off talking about bankruptcy with your attorney because of fears about how you'll be perceived, worries about buying a home or other concerns, don't wait. Talk to them and allow them to help you make a plan to get you out of debt.