There are numerous myths and misconceptions surrounding bankruptcy. Unfortunately, these misunderstandings can cause people to delay seeking debt relief protection. The fact is, people from all walks of life can suddenly find themselves struggling with unpaid bills. It’s important to debunk bankruptcy myths so you can start on the path to a brighter financial future as soon as possible.
Myth #1: People who need bankruptcy are poor financial planners
Most people who need bankruptcy protection are not in this situation because they like to spend, spend, spend. A medical emergency, the loss of a job, or a divorce can all put people in an immediate financial hole. Less than half of Americans have enough financial savings to cover a $1,000 emergency.
You do not have to feel ashamed if you are struggling to keep up with your bills. Even if you happen to be a poor financial planner, bankruptcy is there to help you out of your dire financial situation.
Myth #2: You will lose everything
A bankruptcy filing does not mean you will have to give up all of your worldly possessions. However, some forms of bankruptcy enable you to keep more assets than others.
A Chapter 13 filing will reorganize your debt, allowing you to make affordable payments over three to five years. This filing is typically best for people who are still earning a wage and enables you to retain many of your assets.
A Chapter 7 filing will effectively discharge most of your unsecured debt. You will lose more of your assets than you would under Chapter 13. However, you can still exempt some property. Either way, filing for bankruptcy will not leave you with anything other than the clothes on your back.
Myth #3: Your credit will be destroyed
There’s no getting around it. Your credit score will take a hit if you file for bankruptcy. However, if you are falling behind on your payments, your score is already suffering. Delaying the inevitable will only cause further harm.
The good news is, once you have addressed your debt issues, you can focus on rebuilding your credit. It will take some time, but you may be surprised at how quickly your credit score can recover. Don’t let fears surrounding your credit report influence your decision to seek lasting debt relief.
You don’t have to endure the stress of overdue bills
Bankruptcy protection is enshrined in the Constitution. You shouldn’t allow myths to get in the way of putting an end to collections notices and the stress of overdue bills. You should discuss your options with a skilled professional.