Common Bankruptcy Myths Debunked

Numerous situations may lead you to bankruptcy. Perhaps you lost your source of income, or you recently went through a divorce that left you with debt. Maybe you have been dealing with medical bills for a while now, and the bills have become too much to handle.

Whatever the case, some individuals shy away from talking about bankruptcy because of all the myths and misinformation surrounding it. Read on to differentiate bankruptcy myths from facts and make informed decisions.

Bankruptcy Signifies Failure

People think that filing for bankruptcy indicates personal failure because of the negative connotations associated with the word. However, this could not be further from the truth.

In actuality, many individuals who file for bankruptcy are successful people who have fallen through difficult times. Bankruptcy may be the best solution for you if you struggle to keep up with your debt payments. The step is a chance to start fresh and rebuild your finances.

You Will Never Borrow Money Again

Some assume that bankruptcy will harm their credit score so severely that they will never be able to borrow money again. While it is true that your credit score will take a hit after you file for bankruptcy, the situation is not permanent.

You can still improve your credit score if you make an effort to do so. For instance, you can get a secured credit card and make timely payments. You can also work with a credit counseling agency to help you improve your score over time.

All Your Assets Will Be Taken Away

If your main reason for not filing for bankruptcy is fear of losing everything, then you should know this is not always the case. In fact, many individuals who file for bankruptcy keep most, if not all, of their assets.

The reason is that most states have what is called a bankruptcy exemption list. This list includes items you can keep even after filing for bankruptcy. Some things that may be included in the exemption list are your home, car, retirement savings, and personal belongings such as clothes and furniture. Therefore, just because you owe money does not mean that you have to lose everything you own.

Your Debts Will Disappear When You File for Bankruptcy

Some people think that they can use bankruptcy as a way to get rid of all their debts. But, unfortunately, that is far from reality.

Bankruptcy aims to ease your debt burden, not eliminate it. There are certain types of debts that cannot be discharged through bankruptcy. These include student loans, child support, and taxes.

Under chapter 7 bankruptcy, most of your debts, such as credit card debts, will be wiped out. However, you will still be required to pay your secured debts, such as your mortgage and car loan. As such, don't rush to file for bankruptcy with the hopes that the process will wipe away all your loans.

Your Bankruptcy Status Will be Publicized

Finally, some people are reluctant to file for bankruptcy because they think everyone will know they are not doing well financially. However, that only applies to public figures and prominent individuals.

Although the bankruptcy is a public record, it is not publicized in the media. The general public will only know about your bankruptcy status if they go out of their way to find out. Therefore, you don't have to worry about your friends, family, and colleagues finding out that you have filed for bankruptcy.

Filing for bankruptcy can be a difficult decision to make. But now that you can separate fact from fiction, you will be better positioned to make smart choices. First, consult with a bankruptcy lawyer to learn more about the bankruptcy process and what it entails.



You can trust us at Custer Custer & Clark LLC to provide honest and accurate legal advice. We have years of experience handling bankruptcy cases and will work hard to ensure you get the best outcome possible. Contact us for a consultation.