At one point and time, the concept of bankruptcy was not well known. In fact, it had a bit of a bad connotation.
Over the years, people have gained a greater understanding of the process and how it can benefit them. However, there are still a few myths that cause people to question whether bankruptcy is a good option for them.
One of the most common myths people believe about bankruptcy is that they will lose everything. In certain cases, depending upon the type of bankruptcy they pursue, they may not lose a majority of their assets. For instance, parties who qualify for Chapter 7 bankruptcy may be able to keep most of their assets through available exemptions. On the other hand, some parties mistakenly believe that going through bankruptcy will erase all their debts. The court deems certain debts, such as back taxes, alimony and child support, as the sole responsibility of the debt holder that they must pay.
Contrary to popular belief, filing for bankruptcy is not a financial failing, and paying off debt is not always a better choice. In fact, for those who spend over 50% of their annual income paying for their debts, and who are not able to pay off those debts within five years, bankruptcy can be a beneficial choice for financial relief.
Beyond the actual filing process for bankruptcy, some people believe that undergoing bankruptcy will ruin their financial future and possibly affect their employment options. While bankruptcy does put a ding on a person’s credit report and remains there for seven to 10 years, filers tend to see their scores increase drastically within a few months’ time. Also, there are laws in place to protect filers from employment discrimination.
Though bankruptcy may not be right for all, it can be quite helpful for those who can and choose to utilize it. Gaining a full understanding of the process and having a plan for moving forward after the process is complete are key to success.