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9 Bankruptcy Myths and Facts You Should Know

While no one wants to file for bankruptcy, it usually comes as a last resort when you are overwhelmed by debts. Bankruptcy is often associated with some falsehoods and myths but in truth, it is not as frightening as other people would like to think.

9 Bankruptcy Myths and Facts You Should Know

Read on to learn the myths and facts regarding bankruptcy that you should know about.

Facts About Bankruptcy

Bankruptcy Does Not Destroy Your Financial Future

Many people are skeptical about indebtedness for fear of ruining their financial future. Some people believe that they may not be able to get any credit after filing for insolvency, but as a matter of fact, this is not true.

When you file, your credit rating is affected and bankruptcy will appear on your credit history for about 10 years depending on your level of debts and situation.

Whether you file under chapter 7 or Chapter 13, all negative impacts of unpaid debts will gradually clear and be removed from your credit report after 10 years of filing. This means that you can start afresh and build your credit score on a clean slate.

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When your bankruptcy is discharged, you can get new loans from various lenders.

Bankruptcy lawyers in Los Angeles share that the discharge can also help your credit score increase again since you’re no longer responsible for the debt.

On top of that, you will not lose everything including your assets as purported by other people.

Filing for Bankruptcy Does Not Mean Failure

If you file for insolvency, it does not necessarily mean that you are a failure in life.

Other bankruptcies are a result of medical bills, accidents, chronic illnesses, and stagnant wages. If you are in such a situation, there is no poor financial management that can be attributed to your situation. Administration can give you a new beginning.

Bankruptcy Does Not Discharge All of Your Debts

Both Chapter 7 and Chapter 13 provide relief on some of your debts, but there are exceptions.

For instance, child or family support, student loans, and recent taxes cannot be forgiven. You can discharge other credits like personal loans, medical bills, credit cards, and others.

Filing Bankruptcy Is Not Very Difficult

Filing for bankruptcy is now much easier than in the past owing to changes in different laws. You need to provide the required documents and details like the value of your property, bank statements, tax returns, pay stubs, and others.

You need to consult your attorney to get legal advice about the steps you can take to complete this process. Expert bankruptcy lawyers at Amourgis & Associates explain that your attorney will go over your financial details and explain your legal options.

Experienced lawyers can find solutions to your pressing problems and map a way to help you overcome them. With the help of a professional attorney, you will realize that bankruptcy is not that bad.

Common Myths About Bankruptcy

The following are some of the common myths about bankruptcy that you should know.

Married Couples Should Both File

One spouse can file for bankruptcy even if they share liability for the debt. If one spouse owes a larger amount, they can file for bankruptcy, and the other spouse can pay what they owe in full.

You should consult your lawyer before filing to make an informed decision.

Bankruptcy Permanently Destroys Your Credit

This is not true since bankruptcy helps to rebuild your credit history and restore your financial status.

As you are now aware, bankruptcy will stay on your credit history for about 10 years, but you will have a good credit score when it is finally discharged.

You Lose Everything in Bankruptcy

man showing pocket

Depending on your situation and the chapter that you use to file for bankruptcy, you will not lose everything. Other items are exempt under Chapter 13, and these include personal belongings, household property, jewelry, and other valuables.

You Lose Nothing in Bankruptcy

This is another myth that you must know since some people think that bankruptcy lawyers yield more power and can protect every asset.

Under Chapter 7, you will actually lose a substantial amount of property.

You Can File for Bankruptcy Only Once

Multiple bankruptcies do not look good on your credit rating, but it is possible to file for bankruptcy more than once. With Chapter 7, you can file after every eight years whereas Chapter 13 allows you to file after every two years.

When you are hard-pressed by debts, you can consider the option of filing for bankruptcy to get a fresh start. While bankruptcy is associated with different myths and other falsehoods, it is not true that it will ruin your financial future.

This solution can help you rebuild your credit score though it usually takes about ten years for a bankruptcy to be discharged.

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