Common Myths Surrounding The Bankruptcy Process

Filing for bankruptcy is a serious legal matter and the process can be intimidating. However, much of the stress involved in deciding whether bankruptcy is right for you is based more in myth than fact.

Myth 1: Individuals who file for bankruptcy protections are financially irresponsible. 

Although financial irresponsibility can be a primary contributing factor, the majority of bankruptcies are filed by individuals who have suffered serious medical conditions, divorce, death of a family member or job loss.  Each of these can be devastating to your financial well being. Overall, stagnant wages are more of a contributing factor to the need to file bankruptcy than financial irresponsibility. 

Myth 2: My stuff will be forfeited.  

While many people think that filing for bankruptcy will result in their house, car, or other possessions will be forfeited if they file for bankruptcy, most possessions can be saved.  Overwhelmingly, Chapter 7 filings are considered no-asset cases which allow the debtor to keep all their assets.  Chapter 7 laws allow debtors to declare exemptions for basic assets. Assets not allowable under exemption protections are usually not worth the creditor pursuing

Chapter 13 also allows the debtor to keep their assets with the values each being factored in during the repayment plan. 

Myth 3: Is paying off the debt a better option?

As with any financial decision, there are consequences to filing bankruptcy with the most notable being the hit to your credit rating. Most people consider the relief that comes with eliminating their overwhelming debt along with the ability to reorganize their finances an acceptable trade-off. 

While all cases are unique, a good rule of thumb is that if your debts total more than 50% of your annual income with no other foreseeable way to pay them off within 5 years, filing for bankruptcy protections is likely your best path to regaining control of your finances.   

Myth 4: Bankruptcy will permanently ruin my financial opportunities for the foreseeable future.

It is true that your bankruptcy will impact your credit rating for 7 to 10 years in addition to higher interest rates on new lines of credit. However, many people actually improve their credit score after filing. Also, by taking the right financial steps, such as getting a secured credit card, you can raise your credit rating more quickly as you emerge from bankruptcy

Myth 5:  All of my debts will be eliminated after filing bankruptcy.

Both Chapter 7 and Chapter 13 will relieve most forms of debt but there are exceptions. Debts related to fraud, traffic tickets, government fines and penalties, student loans, and recent income taxes are examples of typical debts that cannot currently be discharged through bankruptcy. 

We are here to help you

If you are facing difficult financial obligations such as medical debt, credit card debt, foreclosure, or repossession contact us now. You don't have to be in financial ruin. The law allows financial assistance or even a fresh start.

Roughly 1 in 10 adults will file a bankruptcy sometime in their lifetime. The process doesn't have to be difficult and we can help.  

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