Filing for bankruptcy is difficult enough, but certain myths and misinformation about it make people hesitate before taking this much needed step to restart their financial life. From how to go about filing, the reasons for filing, and the changes it will bring it one’s life, everyone has an opinion or anecdote. Unfortunately, many of it is incorrect and may prevent people from filing for bankruptcy. Below, a few bankruptcy myths are debunked.
Filing for bankruptcy is a sign of defeat or failure
The most harmful rumor is that bankruptcy is a personal failure and demonstrates that people have spent too much money on shopping or do not know how to budget their finances. This could not be further from the truth. Bankruptcy is usually caused by events outside a filer’s control, such as medical debt, loss of a job, or divorce. Even if someone files for bankruptcy because of a mismanagement of finances, it shows that people understand they need to correct course because matters have gone out of their control.
All property will be lost because of bankruptcy
Depending on the type of bankruptcy one files for, there are a number of exemptions that might apply. This means filers may be able to hold onto their residential home, car, and assets up to a certain value.
All debts are dischargeable through bankruptcy
It is important to understand that bankruptcy does not discharge every debt incurred. Student loans will most likely not be discharged and neither are recent income taxes.
Credit will be damaged forever
People who have been struggling with their debt for a long time have most likely impacted their credit scores as well. Bankruptcy is a way to get their credit back on track, as most obligations will have been discharged. Credit score begins to improve sooner than most people realize it can.
There are a number of factors that should go into deciding whether someone should file for bankruptcy or not, but these myths should not play a part. To understand whether bankruptcy is the best option for one’s situation, it might be beneficial to consult an experienced attorney.