4 Myths about Bankruptcy
Friday, March 23, 2018
As discussed in our last article, the beginning of the year can be a hard time for families attempting to pay off Christmas purchases. Unreliable income, unemployment, underemployment, layoffs, divorce, illness, and other complications make it nearly impossible to plan ahead for holidays or emergencies. Bankruptcy is an option for those struggling to make ends meet, but unfortunately, misconceptions about how bankruptcy really works often deter those who would benefit most.
Myth #1: If I file bankruptcy, I will lose everything.
When filing a Chapter 7 Bankruptcy, individuals can file a Reaffirmation Agreement for assets they would like to keep and continue paying on. As long as they continue to make payments as agreed, they will not lose their home or vehicle.
Myth #2: If I file bankruptcy, I will never be able to own a car or home.
More and more financial institutions are offering loans and services to applicants who have filed bankruptcy. Some even extend credit within months of bankruptcy discharge. Be sure to ask about our favorite lenders during your next appointment.
Myth #3: If I file bankruptcy, it will destroy my credit.
Applicants are more likely to be denied credit immediately prior to bankruptcy than after. Creditors do not want to extend credit to someone who is headed towards bankruptcy, and a credit report with low available credit and late payments points to just that. On the other hand, after bankruptcy discharge, you are unable to file for bankruptcy again for 8 years. Therefore, a creditor can feel more secure and will likely to view your application favorably, as an attempt to rebuild credit. By making an effort to reduce the number of late payments and credit inquiries and increase the amount of available credit at your disposal, you will rebuild your credit over time, despite your bankruptcy filing.
Myth #4: If I file bankruptcy, it will ruin my family and/or my career.
Bankruptcy proceedings are not widely available to the public. In general, the only people who will ever know about your bankruptcy are those directly involved, such as your spouse and creditors. Confidentiality rules prevent those involved in the case from discussing the information with others, so there is no risk of someone sharing the personal details of your filing. With rare exception, it also cannot be used against you by your current or prospective employer and it will not be a question on an employment application.
The bankruptcy process has several safeguards in place to help those in need and prevent anyone from abusing the system. Individuals with a bankruptcy discharge in their credit history were deemed by the courts to have a legitimate case that merited the reduction of elimination of their debts. There is no one who can question that ruling, nor can anyone know for certain that they will never find themselves in a similar situation. You are entitled to relief. We are here to help.
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