Many people have an idea of what bankruptcy is and what it involves, but there are a lot of myths that people believe to be true. Make sure you are properly educated on all of your debt options before making a decision. If everything you know about bankruptcy has been through the grapevine, I have a feeling you will be surprised by some of these popular bankruptcy myths.
MYTH 1: You lose everything in bankruptcy.
FACT: Many personal assets, pensions and, to a certain extent, items like tools of trade, a vehicle and home are exempt from seizure.
MYTH 2: Bankruptcy is only for businesses or if you owe a lot of money.
FACT: Personal bankruptcy is for any individual who owes more than $1,000 and cannot make the required payments on their debt. It is not the amount that you owe but what it does to your life that matters.
MYTH 3: Income tax and Government debt cannot be included in bankruptcy.
FACT: Income tax and most other Government debts are discharged in bankruptcy.
MYTH 4: Student loan debt is not covered by bankruptcy.
FACT: If a person has been out of school for more than seven years prior to bankruptcy, student loan debt is erased, the same as any other debt.
MYTH 5: I will never be able to get credit if I go bankrupt.
FACT: A bankruptcy will stay on your credit bureau record for a period of time. You can start rebuilding your credit rating as soon as you are discharged. For example, you may qualify for a mortgage in as little as two years following your discharge from bankruptcy.
MYTH 6: Everybody will know I filed bankruptcy.
FACT: In most cases the only people who will know about your bankruptcy will be your creditors and whomever you choose to tell.
MYTH 7: Only deadbeats go bankrupt.
FACT: Most people who go bankrupt are good, honest, hard-working, educated and responsible people who do so as a last resort after months, and sometimes years, trying to pay high interest debts that got behind as a result of a significant life event. The common life events are: relationship breakdown, loss of job, serious illness, death of a spouse or a family emergency.
MYTH 8: Bankruptcy will affect my spouse and family.
FACT: Bankruptcy will have no effect on your spouse or his/her career if your spouse is not co-signed on your debt. It will also not affect family members who may apply for a student loan.
MYTH 9: Filing bankruptcy may cause marital and family troubles.
FACT: The opposite is usually true. Most people have a desire to pay their debts and not being able to do so is the cause of stress and resulting family problems. Bankruptcy relieves the stress because there is an immediate end to payments to creditors and collection activities.
MYTH 10: If you file bankruptcy you will never be able to own anything.
FACT: When you have been discharged from bankruptcy, usually in nine months, there are no restrictions on what you can buy or own.
If you’re struggling with debt and have more questions about bankruptcy, contact our office today. We offer free, no obligation consultations so you can leave our office with all of the information you need to make the decision that is best for your situation.
