Common Misconceptions About Bankruptcy
If you’re under a mountain of debt, the idea of filing for bankruptcy
must have crossed your mind. But, like many people, you’re afraid
to consider it. This fear may be caused by the many misconceptions surrounding
bankruptcy. Let’s take a look at some of these bankruptcy myths
and see if we can get to the truth.
Myth #1: I can’t file for bankruptcy.
Because of certain laws passed in the early 2000s, many people mistakenly
believe they cannot file for bankruptcy. This is not true. The process
may be a bit more complicated now, but most people can easily file for
bankruptcy by retaining an experienced bankruptcy attorney.
Myth #2: Filing for bankruptcy will mean I’m a failure or a bad person.
Nothing could be further from the truth. Many notable people have had to
file for bankruptcy at some point in their lives, including Presidents
Jefferson, Lincoln, Grant, McKinley, and Trump. Other successful people
who have sought debt relief through bankruptcy include Henry Ford, Walt
Disney, Milton Hershey, H.J. Heinz, and J.C. Penney, to name a few. Life
happens, and bankruptcy was designed to help hardworking people get a
fresh start if they get into financial trouble.
Myth #3: My reputation will be ruined.
Unless you are particularly famous, no one will know about your bankruptcy
except your creditors and the people you choose to tell — it’s
not like you’re going to have to wear a scarlet letter B around
Myth #4: I’ll lose everything I own.
A lot of people believe this myth, but it’s just not true. In California,
you get to keep your house, car, retirement plan, household goods, clothing,
personal effects, personal injury claims, tools of trade, burial plot,
and more. An experienced attorney can help you protect your assets.
Myth #5: I’ll never be able to get credit again.
On the contrary, filing bankruptcy erases your debt, making you look more
attractive to creditors. This is both good and bad. It’s good because
you can get credit but bad because you don’t want to get into debt
trouble again. Immediately after your bankruptcy is complete, you’ll
start getting credit card offers.
The problem? They will have extremely high interest rates. It’s best
to avoid these credit cards and build up a strong credit rating before
accumulating debt again.
Myth #6: Bankruptcy will ruin my credit score for the next ten years.
While a bankruptcy may stay on your credit report for the next ten years,
that doesn’t necessarily hurt your credit rating. If you’re
considering filing bankruptcy, your credit is already in pretty bad shape.
A bankruptcy will get rid of your debt and allow you to start building
a better credit rating.
Myth #7: I’ll never be able to own anything again.
This is not true. Filing bankruptcy does not prohibit you from buying or
owning property. In fact, getting rid of your debt burden through bankruptcy
makes it easier to get a loan to buy property.
Myth #8: I’m married, so my spouse will have to file for bankruptcy also.
Not true. Although, in many cases, it makes more sense for you and your
spouse to both file for bankruptcy if you both have a lot of debt, it
is not required. The good thing is that you and your spouse can both file
for bankruptcy for one fee.