5 Common Myths About Bankruptcy
Filing for bankruptcy has definitely developed a notorious reputation, however, the average person’s perception of bankruptcy may actually be built on common myths or exaggerated truths. In order to approach bankruptcy with an open mind, let’s begin by unraveling some of the common myths about bankruptcy.
- MYTH: After filing bankruptcy, you’ll be left with nothing
REALITY: Bankruptcy doesn’t have to be a liquidation of your assets. While a Chapter 7 bankruptcy does utilize one’s assets to repay creditors, in a Chapter 13 bankruptcy your debts are simply reorganized into an extended payment plan to help the debtor get back on their feet financially, while still owning responsibility for repaying the debt.
- MYTH: Bankruptcy causes permanent & irreversible damage to your credit
REALITY: Though your credit may take a sizable hit after filing for bankruptcy, the filing only stays on your credit report for an average of 7 to 10 years. Throughout that time, with healthy financial habits, your credit can even slowly begin to improve. Read more on how bankruptcy affects your credit.
- MYTH: Bankruptcy discharges all debt
REALITY: The discharging of debts is very much dependent on the type of bankruptcy that is filed, as well as the types of debts that are owed. While bankruptcy can provide a fresh start financially, it’s generally not a completely clean slate. Rarely are there ever no remaining debts after a bankruptcy filing.
- MYTH: If a couple is married, both spouses are required to file bankruptcy
REALITY: If a married couple is struggling with debt, it is not required that both individuals suffer the repercussions of filing bankruptcy. If much of the debt is in one spouse’s name, then that spouse can file bankruptcy individually to discharge the debt in their name. However, if the debt is under both spouses name, then it’s generally better for both spouses to file to avoid creditors coming to collect from the spouse that does not file for bankruptcy.
- MYTH: Filing for bankruptcy is for the financially irresponsible
REALITY: It’s easy to pass judgement on those who choose bankruptcy that they simply let their spending get away from them due to irresponsible habits. In reality, the majority of those of file for bankruptcy do so because of a life altering event, most often divorce, job loss, or sever illness.
If you’re considering bankruptcy, it is best to speak with an experienced bankruptcy attorney to discuss your specific situation at length to determine if bankruptcy is right for you. Our office can be reached at (702)998-1188, email@example.com, or by scheduling a consultation online.