5 Bankruptcy Myths and the Truths behind Them

Tuesday, May 30, 2017, 6:00 AM | Leave Comment

Bankruptcy has often been synonymous with failure, but these days, that simply isn’t the case.

While it should be viewed more as a last-ditch effort, bankruptcy might be the only solution, depending on your financial situation.

There are still a lot of common myths surrounding bankruptcy, so let’s dispel the five most prevalent myths and explore the truths behind them.

5 Bankruptcy Myths and the Truths behind Them

  1. Myth: You’ll lose everything you own if you file for bankruptcy.

    False. Regardless of which state you live in, there are laws protecting certain assets you possess, such as your car, home, and household objects.

    If you need to do some creative budgeting involving these assets, that is entirely up to your discretion.

    Of course, filing for bankruptcy should usually be the last option, but if you have to file, you will not lose everything you own.

  2. Myth: You won’t be able to qualify for a loan again if you file for bankruptcy.

    False. You will have a bankruptcy filing looming over your credit report for a good decade, but you can rebuild your credit after bankruptcy.

    Make sure that you consider all of your options before you file if you’re thinking of making a major purchase since you will endure higher loan costs after filing for bankruptcy.

  3. Myth: Only financially irresponsible people file for bankruptcy.

    In most cases, this is actually false and is a harmful stereotype. The people who tend to encounter financial difficulties that lead to bankruptcy are often folks who have tried to work hard and be successful.

    High medical costs and skyrocketing divorce costs can drive once-successful people into filing for bankruptcy.

  4. Myth: You can charge up your credit card before you file and get those debts discharged.

    Absolutely false and also illegal. Courts generally consider this to be a form of fraud, and you could potentially end up in legal trouble in addition to filing for bankruptcy if you think you can rack up a massive credit card charge that will get wiped clean by filing for bankruptcy.

  5. Myth: A married couple must each file for bankruptcy.

    This is only true in some cases. If only one partner incurs debt under their name, the other person should not file.

    However, in cases where couples are involved, it is usually best to consult with a bankruptcy lawyer to figure out the best approach to take for filing bankruptcy.

Filing for bankruptcy should never be a knee-jerk reaction and is best left as the last available option.

If you have spent all your resources and feel there is no alternative left, be sure to contact a bankruptcy attorney to ask for assistance in filing for bankruptcy.

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