There are, unfortunately, many different myths about bankruptcy that could end up causing you problems if they lead you down the wrong path. Of course, if you plan on filing for bankruptcy, then it is vital that you hire an experienced attorney, but it also helps if you know what you are getting into beforehand. Below, we will discuss the top four myths that people mistakenly believe about bankruptcy along with an explanation of the actual truth.
1. Bankruptcy Is the End of Your Credit
Yes, your credit will take a blow when you file. And, depending on the situation, it can take a while to build your credit score back up. Bankruptcies can stay on your credit for seven to 10 years, but that doesn’t mean you have to wait the whole time to start working on your credit scores. Instead, about a year after you file, try getting a low limit secure card. Then, make sure you make all of your payments on time. This can start making a difference in your credit score fairly quickly.
2. If You File for Bankruptcy, then You Are Financially Irresponsible
There is a stigma about bankruptcy and it’s that anyone who files is irresponsible or they wouldn’t have gotten in the situation. However, there are quite a few different reasons why you could be a completely responsible person and still have to deal with the effects of bankruptcy. For example, if you have been unemployed for a long time, are facing massive medical bills, or are dealing with a life event like divorce, then you may be in severe financial trouble.
3. When You File for Bankruptcy, You Get Out of All Your Debts
That’s a big myth and it is not true. There are types of debts that will not be discharged and you will have to continue paying, such as child support or alimony. More than that, some types of bankruptcy actually require that you continue paying on a plan set up by the courts. If your assets are sold off and there is still money owed, then you may be responsible for part of that debt too.
4. You Can Spend with Abandon Right Before You File
Some people, when they know they will be filing for bankruptcy, will spend with abandon, thinking they can do what they want and not have to deal with the debt. It doesn’t work that way. In fact, if you do this, then you could be charged with fraud. Any debt that you have incurred as a result of this fraud will still be yours to pay. It will not be discharged, and you could face serious trouble with the courts.
As long as you understand that these things are myths, you will better be prepared for the actual process of bankruptcy. However, before you go through this, make sure you hire an attorney with extensive experience in the area. That way, you will have legal representation to look after all of your rights throughout the whole process.
