Common Bankruptcy Myths Debunked
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.
Schedule a free consultation to review your options with our team.