Bankruptcy is a form of debt relief which entails a legal process that enables debtors to wipe out their debts or consolidate and repay them. It is therefore a beneficial and powerful tool in case you find yourself in some sort of financial woe. However, it is an intricate process which has been complicated further by numerous myths that surround this particular realm of the law. In this article we will delineate fact from fiction as they pertain to bankruptcy law. Below are several myths that we aim to debunk:
Myth #1: Only financially irresponsible people file for bankruptcy
Totally untrue. People who decide to file for bankruptcy come from all levels of society – lower class, middle class, upper class and other classes in between. For some reason they just failed to sustain their monthly payments. Anyone can accrue debt in a number of different scenarios, including loss of a job, divorce, vehicular accident, sudden illness, or even unpaid student loans. There are many things in life that are simply beyond our control and even the most fiscally responsible people can get shoved into debt and left with no choice but to file for bankruptcy.
Myth #2: Debtors will lose everything they have by filing for bankruptcy
Nothing can be farther from the truth. While this may sound logical and certainly a legitimate concern for many who are burdened by mounting debt, it is not imperative for you to just give up properties in case you do file for bankruptcy. As a matter of fact, a vast majority of bankruptcy filers don’t lose anything! Moreover, there are types of bankruptcy which can protect your prized possessions. For instance, you can file Chapter 13 bankruptcy to save your house from foreclosure.
Myth #3: You can only file for bankruptcy once
A surprising number of debtors actually believe this. They try to avoid bankruptcy filing over fears that they may encounter future financial difficulties and have used up their opportunity to file for bankruptcy. The truth is that the law allows you to file more than one bankruptcy case and give you a fresh start. Under a Chapter 7 bankruptcy, your debts can be discharged once every eight years. For Chapter 13 bankruptcy, you can receive a discharge every two years. Just bear in mind that if you get a discharge under Chapter 7, you need to wait six years before receiving a discharge under Chapter 13. On the other hand, if you obtain a Chapter 13 discharge, you have to wait four years to get a discharge from a Chapter 7 case.
Myth #4: Everyone will know that you filed for bankruptcy
Although it’s true that bankruptcy records are accessible to the public, there is very little chance that it would be known unless you are a prominent figure or you tell people personally. In addition, scores of people file for bankruptcy which means public records are literally inundated with names. So if someone attempts to search specifically for your name, he/she may have to rummage around for days to find yours! In most cases, the only people knowledgeable about a particular filing are the creditors, the trustee, the debtor and the bankruptcy attorney. There is virtually no chance that anyone else will know that you filed. The bottom line is that if you don’t want people to know you filed for bankruptcy, just keep the matter to yourself.
Myth #5: You will never rebuild your credit after filing for bankruptcy
Quite the opposite. The fact is that banks and other lenders tend to give a second chance to people who file for bankruptcy. Wondering why? Come to think of it, bankruptcy is meant to wipe out your debt, and eliminating such debt will allow you to handle more credit. Hence, you will look more appealing to would-be lenders! Also, people who experience the troubles of bankruptcy become more financially responsible and conservative with their expenditures, thereby showing that they can manage payments and rebuild their credit.
Don’t be deterred by the negative stigma that goes with filing for bankruptcy. Don’t allow the aforementioned myths stop you from filing and getting the fresh start that you deserve. To know more about bankruptcy and how to decide whether or not it suits your specific circumstances, consult one of our experienced bankruptcy attorneys. You will be informed about your rights as well as the options available, including Chapter 7 and Chapter 13 bankruptcy.