Oftentimes, the biggest barriers to filing for bankruptcy are misinformation and myths. There are so many misconceptions surrounding filing for bankruptcy. Below are five bankruptcy myths: busted.
Myth #1: My Credit Will Be Destroyed Forever!
A bankruptcy will stay on your credit report for ten years under Chapter 7 and seven years under Chapter 13. However, even with a bankruptcy on your report, many filers will see their credit score increase immediately after a bankruptcy. Because your debts are wiped clean or put into a repayment plan, you will likely see your credit improve in the months and years after a bankruptcy. While it is true that you may have to pay high interest rates for a time after bankruptcy, many lenders will still extend you a line of credit and these high rates will eventually lower over time.
Myth #2: I Will Lose Everything.
There are laws in place to prevent debtors from losing personal belongings and even larger assets during a bankruptcy. Depending on how you file, you may be able to keep most or all of your personal property. Chapter 13 will often see debtors losing nothing, while Chapter 7 bankruptcy includes specific sets of exemptions that allow you to save a significant amount of your assets. A bankruptcy attorney can help you determine which assets you can save.
Myth #3: Filing For Bankruptcy is too Difficult!
In the vast majority of bankruptcy cases, it is a straightforward process. While the documents themselves can be complex and confusing, an experienced bankruptcy attorney can process documentation to ensure the filing goes smoothly. You will personally need to provide your property value, bank statements, tax returns, pay stubs, a list of your debts, and some other common documents, but working with a bankruptcy lawyer means they'll do most of the tricky parts for you (or with you).
Myth #4: You Can Only File for Bankruptcy Once.
You can absolutely file for bankruptcy more than once. Chapter 7 bankruptcy allows you to receive a discharge once every eight years and Chapter 13 bankruptcy allows you to reorganize your debts once every two years. You can also file for Chapter 13 bankruptcy six years after discharging under Chapter 7; you may file Chapter 7 four years after a Chapter 13 reorganization. If your previous bankruptcy case was dismissed without any discharge, there is typically no waiting period to file again, unless the case was dismissed with prejudice.
Myth #5: I am a Failure.
Financial struggles can happen to literally anyone. Filing for bankruptcy IS NOT A SHAMEFUL EVENT. Major life setbacks—divorce, medical events, loss of employment, legal troubles—can all lead to money trouble. Even if you made poor choices that led to unmanageable debt - the good news is that you're ready to start fresh. Everyone makes mistakes. It is your right to seek discharge under bankruptcy and get the relief you need to chart a successful financial future.
There are certainly downsides to bankruptcy, but even the worst aspects of bankruptcy can be better than struggling through day-to-day life carrying the weight of debilitating debt. Veitengruber Law can provide the information and guidance you need to help make the best decision for your specific situation.