Myths abound regarding bankruptcy. Ask the average person who may not be so well-versed in how bankruptcy benefits people, and you are bound to get misunderstandings and misconceptions.
Bankruptcy is a tool that helps people place debt behind them and march on to a fresh new financial life. Most debt is erased such as those related to credit cards, medical bills, personal loans and utility bills. Still, some people remain hesitant to file, sometimes, due to feeling judged or simply not understanding how bankruptcy works.
Avoid hearsay, rely on credible sources
Occasionally, people rely on hearsay regarding bankruptcy. This may lead them down the path of avoidance. It is crucial to learn about bankruptcy from credible sources such as an attorney, or perform personal research to educate yourself
Here are some common misconceptions about bankruptcy:
- Bankruptcy never goes away: This is not true. Chapter 7 bankruptcy – the straight bankruptcy in which individuals must sell their assets – remains on a person’s credit record for a decade. Chapter 13 — a reorganization in which filers keep their property – stays on a credit report for five years.
- Bankruptcy filers lose their homes and cars: Not necessarily. As noted with Chapter 13 bankruptcy, people retain their property such as their homes and vehicles. But this only holds true as long as the person fulfills a court-ordered repayment plan. But, in the case of Chapter 7, the chance exists that the filer may lose his or her home or car.
- Only the reckless file for bankruptcy: This is far from the truth. Anyone in nearly any financial situation may be a bankruptcy candidate. All it takes is a sudden life event such as a medical crisis to lead a person to bankruptcy. A health scare can cause enormous medical bills that even the average family may be unable to pay.
- Bankruptcy is synonymous with failure: Shake off this misconception, too. Bankruptcy is a sign that you are taking control of your financial future. You have made an important first step toward financial recovery.
Ignore these fallacies about bankruptcy. You have made the decision to pursue the bankruptcy route because you know it will help you.
A beneficial tool
What is not to like about discharging debt, no more notifications from creditors and not having to second guess yourself? Bankruptcy can help anyone. And stop listening to others who think they know all the answers. Trust your instincts.