“There’s a misunderstanding about how bankruptcy works and what it would take from you,” Cox says.
The vast majority of people who file the most common type of bankruptcy, Chapter 7, don’t have to give up any of their possessions. The types and amount of property you can keep vary by state, but typically include clothing, professional tools, wedding rings and at least some equity in your home. A few thousand dollars of equity in a car is usually protected as well. If you have assets that wouldn’t be protected in Chapter 7, you could file for a Chapter 13 repayment plan instead.
You can get credit again
A bankruptcy filing remains on your credit reports for up to 10 years. But credit scores can start to recover soon after you file. It’s possible to get a VA or FHA mortgage two years after a bankruptcy. Most loans require you to wait at least four years.
People can start to rebuild credit a few months after their bankruptcy case is discharged by getting secured credit cards, which require a deposit, or credit-builder loans, available from some credit unions, community banks and online.
The problem with optimism
Debt often leads to anxiety and depression that makes taking action difficult, Cox says. Many of his clients arrive at their first meeting with grocery sacks full of unopened bills.