Most people have heard about bankruptcy, but few actually understand what it means. This has led to numerous myths being passed around about the bankruptcy process and how it affects people who file. Today we are going to tackle four of the most common myths that our firm hears.
Myth No 1: Filing for bankruptcy ruins credit scores.
It's important to know that while a bankruptcy can remain on your credit report for 10 years, that does not mean that you will have poor credit during that entire time. Your credit, or your ability to borrow, will likely increase after filing for bankruptcy because you will no longer be struggling to pay bills that you cannot afford.
For the most part, you have control over building up your credit after bankruptcy, and it can often be repaired within a few years of the date your debts are discharged.
Myth No. 2: Bankruptcy means losing everything.
Yes, Chapter 7 bankruptcy involves liquidating your assets in order to pay off as many creditors as possible. However, what many people don't realize is that most of your assets are likely exempt from liquidation. For example, the U.S. bankruptcy code allows you to keep your home, car, retirement assets and other belongings.
Additionally, in Chapter 13 bankruptcy, which involves a reorganization of your debts, you are often able to keep all of your assets.
Myth No. 3: It is only possible to file for bankruptcy once.
In some cases, it is possible to file for bankruptcy more than once, though there may be consequences with filing for a second time. Everything is dependent on your unique situation, so talk to an experienced bankruptcy lawyer in your area for personalized advice.
Myth No. 4: Filing for bankruptcy is admitting failure.
Many people shy away from bankruptcy because they are afraid of what it means. They fear that if they file, they are admitting failure. The truth is that taking responsibility for your debt is not failure.
In many cases, you got in over your head with debt because of circumstances that were out of your control, such as an illness, job loss, divorce or death in the family. You should not have to spend the rest of your life in debt because of the unfair hand life dealt you. Asking for a fresh start is an honorable thing to do -- and it takes courage.
For more bankruptcy truths, schedule a free 30 minute consultation with the experienced Galveston, Texas, bankruptcy firm Gipson, Norman & Root. Your debt-free future is closer than you think.