For many Americans,
bankruptcy is akin to a mythical beast that represents an unknown and frightening
legal and financial venture. The mystery surrounding bankruptcy has been
built up over the years as rumors and speculation circulate more than
actual facts. The result is many people shying away from bankruptcy due
to misinformation when, in actuality, it could be greatly beneficial for
themselves, their families, and their businesses.
How many of these common bankruptcy myths do you believe?
Only financially irresponsible people file for bankruptcy.
This myth could not be further from the truth, as bankruptcy is filed
by people of all walks of life and sometimes by huge corporations with
dedicated financial planners and accountants. In fact, the leading cause
of personal bankruptcy in America is unpaid medical bills. How a person
manages their wallet has nothing to do with whether or not they are going
to catch a debilitating illness or get struck by a reckless driver.
Bankruptcy will erase all debts.
Unfortunately, this is a myth, and possibly the most widespread one on
this list. There are numerous types of debt that cannot be discharged
through bankruptcy, and many more that are tied to pieces of property
and assets, meaning that if they are discharged, something of value will
go with it.
Debt accrued just before filing for bankruptcy disappears.
In many forms of bankruptcy, only old debt is eligible for discharge.
Going on a spending spree before filing and thinking that the costs will
be washed away is not only impractical but it can also be seen as dishonest.
Bankruptcy courts will not favor people trying to “game the system”
in any way.
Your credit score is ruined by bankruptcy.
The notion that your credit score is history after filing for bankruptcy
probably stems from the fact that most people’s credit scores take a hit
during bankruptcy filings. However, when bankruptcy is completed, it might go
back up on its own. If it does not, carefully using credit lines and loans
in the future can rebuild credit score. There is nothing that can permanently
dock your credit score number.
The bankruptcy Chapter you choose doesn’t matter.
There are considerable differences between a
Chapter 7 bankruptcy and a
Chapter 13, and you really must review them before making a decision. Chapter 7 tends
to eliminate more debt but also risks more collateral property; Chapter
13 typically allows you to hold onto your property but requires you to
pay back some of your debt, which can leave next to nothing for extra
expenditures for the next three or five years.
If you have more questions or concerns about bankruptcy and the many myths
surrounding it, let Albaugh Law Firm and our Jacksonville bankruptcy lawyers
be your legal guides. With our 70+ years of combined legal experience
and compassionate approach to legal cases, you will feel comfortable throughout
the bankruptcy process. We may even be able to determine if bankruptcy
is not the right solution for your unique financial situation.
free consultation to review your options with our team.