At some point in life, many Connecticut residents will experience unmanageable debt. Some will end up filing for bankruptcy; others may not due to the following bankruptcy myths.
Why file for bankruptcy?
There are different reasons to file for bankruptcy. Often, a person has amassed too much debt to handle and cannot afford to pay back their creditors. If they have explored other avenues to alleviate their debt but have found that nothing works, bankruptcy is the next logical step. Individuals who have very few to no assets may qualify for Chapter 7 bankruptcy; this requires passing the means test. Chapter 7 allows people to discharge unsecured debts like credit card debt and personal loans.
Another reason to file for bankruptcy is that you can afford to repay your debts but need more time to do so. In that situation, you may qualify for Chapter 13 bankruptcy so that you can have anywhere from three to five years to pay back your creditors. With that extra time, you can continue paying off secured debts such as car loans and mortgages and discharge your unsecured debts.
Common bankruptcy myths
Some people believe that filing for bankruptcy spells the end of their credit. Although it’s true that bankruptcy initially causes your credit score to decrease, this isn’t a permanent thing. You can qualify for a secured credit card that works on a deposit of your own money and gradually rebuild your credit.
Another myth is that married couples must jointly file bankruptcy. This isn’t true unless you both share the debt. If one person’s name is tied to the debt and the other’s is not, that spouse is exempt from filing for bankruptcy.
Perhaps the biggest reason why people fear bankruptcy is the myth that if you file, you lose everything. This is a common misconception among some that filing means you’ll lose your home, vehicle, money and all your belongings. In reality, most property is exempt; other items aren’t valuable to creditors.
Bankruptcy is not the end of the world. For some people, it’s the fresh start they need.