Did you know that bankruptcy filings have dropped since the previous year by about 24%?
Going bankrupt is about the worst possible financial news there is. It’s the end of the road and means you ultimately could not pay off your debts. But thanks to Hollywood and common misconceptions, many have mistaken ideas about what bankruptcy actually is.
The bankruptcy process is a complicated thing, and misconceptions don’t help. If you plan to file for bankruptcy, it’s in your best interest to know what it is–and is not.
In this guide, we’ll discuss the biggest myths about going bankrupt.
1. Going Bankrupt Is Only For Failures
Picture the sort of person who goes bankrupt in your mind. Chances are they make poor financial decisions that led to their own demise. As such, there’s a strong stigma surrounding the bankruptcy process.
That couldn’t be further from the truth. Times are hard for everyone, and the pandemic made them even harder. Whether due to student loan debt or unstable employment, everyone has suffered to some degree.
The point is, you shouldn’t beat yourself up if you decide to file for bankruptcy. You’re not the first and won’t be the last. Plenty of hard-working Americans like yourself have had to do the same, and it helps you get out of a difficult situation.
2. After Going Bankrupt, You’ll Lose it All
When you think of going bankrupt, you likely imagine a nightmare out of a medieval movie. A poor carpenter has to sell himself and his family into slavery or is taken to a debtor’s prison. He loses everything, including his valuable heirlooms and his wife’s dowry.
But these myths are, well, quite outdated. Modern law has made progress in leaps and bounds.
Nowadays, the government makes generous exemptions to those that must file for bankruptcy. There’s a good chance you’ll get to keep many of your assets, home and car included.
In any case, a bankruptcy lawyer can fight your case. They’ve dealt with this situation before, and they know how to get you the best exemptions. There’s a good chance you’ll get your life back sooner than you think.
3. You’ll Lose Your Job
Going bankrupt may seem like absolute rock bottom. You falsely believe that you’re going to lose it all, and then something even worse happens: you lose your job.
However, this is a big myth same as the one before it. It’s illegal for your employer to discriminate against you based on your financial status. That includes if you go bankrupt.
Don’t let your employer pressure you into believing that you’ll lose employment. Don’t fall into the belief that you’ll struggle to find work afterward more than you already would. You’ll have that needed financial support whether or not you go bankrupt.
This is a relief, given that you’ll have money for the harder times. You’ll be able to support yourself until your fortune improves.
4. Your Credit Is Ruined Forever
It’s easy to see why some would come to believe that your credit is tanked after bankruptcy. While this may be true initially, it’s false to say that your credit won’t ever recover. In fact, this is a clean slate that may make it recover faster!
Think of this from a lender’s perspective. After going bankrupt, you’ve relieved yourself of your debts. You now have a lot more financial freedom, thereby making it worthwhile to lend to you.
Not only that, but bankruptcy remains on your record for only 10 years. You can even apply again for bankruptcy after 8 years. Whatever happens, there is time for you to rebuild your credit and make it seem like bankruptcy never happened.
The good thing about credit is that it only takes a few years to rebuild. Just make your payments on time and you could easily reverse your standing.
5. All Debts Are Forgiven
Unfortunately, bankruptcy is not a cure-all. You can wipe out some of your biggest debts, but not all of them. Here are some debts that will likely remain:
- Child support
- Student loans
- Criminal restitution
- Many taxes
While that may seem discouraging, many people have much larger debts in other areas:
- Medical bills
- Repossession debts
- Credit card debts
That said, there are some cases when a bankruptcy lawyer can file for different types of bankruptcy. In some cases, they may be able to help you file for bankruptcy with taxes and other debts.
6. You Need to Be Broke to File for Bankruptcy
Even before you’ve run out of money, it may be obvious that you won’t be able to keep your head above water. You can see that your debts continue to mount up. But you may falsely believe that until you have nothing left, you can’t file.
This isn’t true. You can file for bankruptcy if you have proof that you cannot pay off your debts. This can happen long before you go broke.
There’s no need to stress for years as you watch your debt mount up. You can rest assured that a bankruptcy lawyer will help you to get a clean slate. Then you can move on and leave the horrors of debt behind.
Contact a Bankruptcy Lawyer
Going bankrupt is not fun, but it’s unfair to fall victim to the false assumptions that many have perpetuated for years. There are some big myths surrounding bankruptcy thanks to popular culture. Fortunately, none of them are true.
If you’re looking for representation in your bankruptcy case, you’ve come to the right place. Contact Meredith Law Firm for a judgment-free consultation of your case.