Quite a few individuals fear the idea of bankruptcy. They may have heard inaccurate information about bankruptcy which leaves them with the impression that filing could easily do more harm than good.
While it is true that bankruptcy isn’t the right solution for every person facing financial hardship, misinformation about bankruptcy can give people the wrong idea. People who learn the truth about the myths outlined below may feel more comfortable with the idea of pursuing personal bankruptcy.
Bankruptcy means giving up all assets
One of the most persistent myths about bankruptcy is the claim that those who file must give up or liquidate most if not all of their valuable property. Asset liquidation is only necessary in a Chapter 7 bankruptcy filing. Even then, only a small portion of those seeking bankruptcy relief actually have to liquidate any of their property. Exemptions can protect most assets in a Chapter 7 case.
Bankruptcy eliminates credit opportunities
Most people start receiving credit card offers within a few weeks of their discharge. They may be able to qualify for a mortgage or a car loan within a year or two. As more time passes, the available credit options improve for those with the bankruptcy on their record.
Bankruptcy is a permanent credit report blemish
Some people believe that lenders and employers can find out about their bankruptcy decades afterward. However, as with any issue reported to the credit bureaus, bankruptcy eventually falls off of someone’s credit report. A Chapter 7 bankruptcy comes off of the filer’s credit report 10 years after discharge, and a Chapter 13 bankruptcy comes off of a credit report seven years after discharge.
Bankruptcy is expensive
Retaining an attorney to help with bankruptcy does cost money. So do the actual filings with the courts and the required educational courses. However, when compared with years of financial hardship, those costs are actually relatively affordable.
Bankruptcy leads to intense social stigma
Technically, the courts do publish notice about bankruptcy filings, and the record of a bankruptcy discharge is viewable for a set amount of time after the discharge on a filer’s credit report. That being said, most people have no way of knowing that a bankruptcy occurred. They don’t read the legal section of the newspaper or have access to an individual’s credit report. Members of the community do not necessarily need to learn about the bankruptcy if someone handles the process quietly. Even if word about the bankruptcy spreads, people may not be as judgmental as filers assume.
With the right support and plan, personal bankruptcy can be a smart undertaking for those struggling with debt. Learning the truth behind bankruptcy myths can help people decide if bankruptcy is their best option.
