There is no shortage of myths surrounding bankruptcy, many of which are harmful to consumers with unmanageable debt. These myths create the stigma that keep those who should file bankruptcy from doing so out of embarrassment or fear. Bankruptcy is often the only option for gaining control of finances and being able to continue to pay for daily living expenses such as food and shelter. Here is a handful of the most common myths you’ll find regarding bankruptcy, and the truth about those myths.
Bankruptcy Discharges all Debt
A common myth surrounding bankruptcy is that when you file, every debt is discharged, and you don’t owe or have to continue paying for anything. The truth is that many types of debt may not be discharged in a bankruptcy and you will have to continue to pay them even after filing. For example, if you have a house and car, you are still responsible for making the monthly payments. This goes along with the myth that you could go on a shopping spree and rack up a bunch of debt and then immediately file bankruptcy. It is just not accurate.
Student Loans and Bankruptcy
Many people believe that student loans are never discharged in bankruptcy. While it’s true that, for the most part, you can’t file bankruptcy on student loans, there are exceptions to the rule. For example, if you can prove that paying your student loans will cause undue hardship, you may be able to include this debt in your bankruptcy. However, proving you are unable to pay back student loans is difficult, and will require the experience of a qualified bankruptcy lawyer to help.
Permanent Damage to Credit
Although it’s been proven to be a bankruptcy myth, many still believe that if you file your credit rating will be permanently damaged, and that you’ll never be approved for credit again. This is absolutely not true. In fact, depending on your situation, bankruptcy can actually help your credit. Furthermore, once you’ve filed, you can have a fresh start and can begin rebuilding a positive credit rating immediately.
Types of People Filing Bankruptcy
This is one of the most harmful myths simply because the stigma surrounding bankruptcy can keep people who need to file from filing. Some people believe that only very irresponsible people who intentionally avoid paying their bills file bankruptcy. Medical expenses are one of the primary causes of bankruptcy, which means that most people that filed have likely been responsible consumers with an illness or injury that resulted in unmanageable debt. And, because you have to qualify to file bankruptcy, the chance that most filers are taking advantage and just trying to get out of paying their debts, is unlikely.
You shouldn’t be afraid or embarrassed if you need a fresh start to gain control of your debt. We can help you figure out the best way to proceed, whether through a bankruptcy alternative or bankruptcy, according to your circumstances.
What myths about bankruptcy have you heard? Please share them with us in the comments below!