5 Myths & 5 Truths About Declaring Bankruptcy
Bankruptcy can be a real solution to some individuals’ financial problems. However, many people have misconceptions about what bankruptcy entails. Here is a look at five myths about declaring bankruptcy, and five truths.
Five Myths About Declaring Bankruptcy
1. Only Financially Irresponsible People File for Bankruptcy
The biggest myth, or stigma, attached to bankruptcy is the fact that only financially irresponsible people could find themselves in such a situation. Unfortunately, that is not true. Most of the people who declare bankruptcy have been forced to do so due to another reason: losing their job, going through an expensive divorce, suffering a serious illness or injury, or mortgage issues.
2. All Past Debts Are Washed Away
Almost all past debts are wiped off by declaring bankruptcy, but college loans and child/alimony support payments still remain. Tax debts may also not be waived completely, although they are often reduced to a great extent.
3. Spent Like Crazy, Then Declare Bankruptcy
Courts have been instructed to look for fraud in all bankruptcy cases, which means that anyone trying to cheat the system will be caught. People who purposefully spend crazy amounts of money on credit cards, declare bankruptcy, and then walk away will not be allowed to do so.
4. Your Credit is Permanently Ruined
While it takes a long time to recover from bankruptcy, there is no permanent damage to your credit. You can get secured credit cards within a month of declaring, and those will help you work your way up the credit ladder. After a year or two you will be eligible for a regular credit card, and before you know it you will have recovered from declaring bankruptcy.
5. Bankruptcy Solves All Financial Problems
Chapter 7 and Chapter 13 bankruptcies will not take care of all your financial problems. There will still be payments you have to make, debt obligations that must be met, and there will be the small matter of improving your fallen credit score.
Five Truths About Declaring Bankruptcy
1. Declaring Bankruptcy is Not Complicated with a Lawyer
There are no great complications in declaring bankruptcy, especially if you are certain about your decision. The best solution is to hire a bankruptcy law firm, and ensure that they will help you every step of the way. If everything is processed correctly, you could have your debts discharged within nine months.
2. You Can File For Bankruptcy Discreetly
Many worry about the stigma attached to bankruptcy. However, this process can be as discreet as possible. Unless you are famous, or you will be pushing for loans and credit cards as soon as you declare, there is no reason why anyone would know about your decision.
3. You Can File More Than Once
Many claim that bankruptcy can only be filed for once in a lifetime, but that is not true. Chapter 7 bankruptcy can be filed for every eight years, and chapter 13 every two years.
4. You Can Save Your Property
Even if you are declaring chapter 7 or chapter 13 bankruptcy, there are ways to keep a hold of your properties. Each state will have different laws on your valuable assets, such as homes, properties, cars, stock market accounts, etc. It is important to consult an attorney before further exploring your options.
5. Bankruptcy Can Be Filed For Individually
Married couples absolutely do not have to file for bankruptcy together. If you are worried about bringing a ton of debt into a marriage, you can rest easy. While you can accrue joint debt, or deal with an individual’s debt issues together, you can file bankruptcy without it having any impact whatsoever on your partner.