It is time to examine a few bankruptcy myths. For many, filing for bankruptcy can be a difficult, confusing ordeal. It can be easy to get caught up in the process of filing for bankruptcy. This is why having an experienced bankruptcy attorney on your side is essential. There are several common myths about filing for bankruptcy that scare people away from filing.
Here are five big myths about bankruptcy that simply aren’t true:
Myth #1: You’ll lose everything if you file for bankruptcy.
Many may think that filing for bankruptcy means that they will be forced to give up their homes, cars, and other important assets. In truth, most clients are able to keep all of their assets because the bankruptcy exemption laws allow debtors to keep their assets. Additionally, under Chapter 13 debtors are generally permitted to keep all of their assets; however, the value of the assets can affect the amount of your repayment plan.
Myth #2: You’ll get rid of all of your debt once you file.
While both Chapter 7 and Chapter 13 can provide you relief from most of your debt, there are some exceptions. Typically, you cannot discharge student loans. Recent taxes, child or family support, and debts that were a result of fraud are not dischargeable. Most personal loans, credit cards, and medical bills can be discharged.
Myth #3: Paying off the debt is the better option.
While paying off debt is always wise, sometimes filing for bankruptcy is the better option for you, given your financial situation. In some cases your credit score goes down, but in some cases your score will actually improve. Also, a sense of relief in getting rid of debt-induced stress can actually improve your mental and even physical health. If your debts are more than 50% of your annual income and you don’t believe that you can pay them off within 5 years, you should strongly consider seeking out the counsel of a good bankruptcy attorney.
Myth #4: You’re a failure if you file for bankruptcy.
Did you know that approximately 57% of bankruptcies filed in 2009 were a result of medical bills? Over the past decade, the cost of medical deductibles has skyrocketed up to seven times faster than wages have risen. Therefore, several bankruptcies are merely the result of stagnant wages, not poor financial management skills. Even if this isn’t the reason that you are considering filing for bankruptcy, it is not because you are a failure or are a bad person. It is simply a remedy to cure what ails you! Even if you do file for bankruptcy, you can still pay your creditors back, except you can do it on your terms. Bankruptcy allows you to decide when, if, and how much you pay your creditors.
Myth #5: Filing for bankruptcy will destroy your financial future.
Far from it. Sure, you will probably have limited access to credit and will have to pay higher interest rates for a few years, but your credit score is very much likely to improve shortly after you file! Consider this: according to a report from the Federal Reserve Bank of Philadelphia, which used data from Equifax, those who filed for Chapter 7 bankruptcy in 2010 had an average credit score of 538.2 on Equifax’s scale. Afterward, however, the average score increased to 620 once those bankruptcies were finalized less than a year later. Besides, there are ways you can rebuild your credit after bankruptcy. It never has to spell ruin for you! Your present finances may well be the reason why you will never become financially secure until after you have resolved your present financial circumstances.
Filing for bankruptcy doesn’t need to be frightening or difficult. We at the Bankruptcy Advocates can help! Call us today at (618) 549-9800 for a free consultation. We can help you determine if you need to file for bankruptcy, guide you through the entire process, and help you gain control of your life once more!