People encounter hard times financially for many different reasons. Medical conditions may prevent a person from going to work and therefore affect their pay. Other instances can involve medical bills that are so enormous that they rip a person’s savings away. In many of these instances, the affected persons have to find a remedy for their financial situation. While bankruptcy is a remedy for financial problems, myths surrounding bankruptcy cause apprehension from those looking into debt relief options. Continue reading to discover six common myths about bankruptcy that also get debunked here.
1. Bankruptcy Proceedings Will Take All of Your Assets and Belongings
As stated above, there are several different types of bankruptcies. Bankruptcy offers several exceptions, including home, your car, and possessions that you need to live. Most people do not own extravagant luxuries such as yachts, airplanes, buildings, and expensive artwork. Those are the items that may not be exempt from a bankruptcy filing.
In addition, there is a trustee who will oversee your bankruptcy proceedings. That person will verify your assets and determine if any luxury items aren’t necessary for living. The court will use the trustee’s information to determine their findings.
2. Everyone Will Know You Filed for Bankruptcy
The stigma attached to bankruptcy Causes people to Second guess whether they want to file for bankruptcy. When you file for bankruptcy, you will provide the court with a list of your creditors. Your lawyer, you, and the creditor’s Representatives (aside from the judge and trustee) are the only ones who will know about your bankruptcy.
3. You’ll Never be Able to Get Another Credit Card
You will likely be able to get new credit cards within six months of your case being resolved. Although your post-bankruptcy interest payments will be higher than before, establishing a good payment history with your creditors will help you rebuild credit, which will lower your interest rates.
4. Bankruptcy Will Ruin Your Credit Forever
Your credit rating will likely take a hit due to bankruptcy, as alluded to above. Some top-rated creditors may decline extending credit until you have a proven history of making good gray payment decisions. So, while your credit will not be ruined forever, you may experience high-interest cards, lower credit offers, or even needing a cosigner on some applications until your good standing is re-established.
5. You Cannot Afford to File for Bankruptcy
When we think about any area of the law, the first thought is usually money. The same is true when looking for a bankruptcy attorney. However, the fear of getting into more debt is unbearable to some. Worrying about who pays for bankruptcies is a worry that you don’t need to add on top of your distressed financial situation.
That is not to say that filing bankruptcy is free; it is not. There are filing fees, credit counseling costs, and some debtor education courses that may be necessary. Depending on the type of bankruptcy you file, there may also be a repayment option for your debts.
6. You Have to Use Your Life Savings Before You Can File Bankruptcy
Keeping the cash that you have saved is another one of those situations that are based on the type of bankruptcy that you filed and a few other factors. Some of those factors include:
- The type of bankruptcy you file
- How much cash you are trying to exempt
- Where the cash came from that you want to accept
Conclusion
There are many reasons that people file for bankruptcy. Although there is a lot to know about bankruptcy, the main takeaway is that bankruptcy happens when a company or person cannot pay their debt. They then file a petition with the court to have their debts and assets measured and evaluated, and then a repayment plan is initiated and settled. Some people worry about the myths discussed above, but as you have learned they aren’t true. When bankruptcy becomes necessary, now you know how you can protect yourself and your family.
