The ability to file for bankruptcy is an important resource for people unable to pay off their debts. Nevertheless, few people understand how bankruptcy really works.
Here are our picks for the 5 most common bankruptcy myths.
- Only irresponsible people file for bankruptcy
There’s a common misconception that people file for bankruptcy because they spent their money irresponsibly.
In reality, most bankruptcies are filed because of unemployment, high medical bills, or a costly divorce. These unforeseen events can cripple the financial well-being of even the most financially responsible people.
The COVID-19 pandemic and resulting lockdowns have also caused many people financial hardship. As government protections start to loosen, many people have begun to turn to bankruptcy to resolve their financial struggles.
- You’ll lose all your property
People sometimes imagine they’ll lose a lot of their property if they file for bankruptcy. Most properties, however, including your house, car, and clothing, are usually exempt from creditors. The details of property loss are beyond the scope of this article, but if you have a question text Leslie at 361-648-6888.
Even property that could be liquidated may not be taken from you. Items such as TVs or watches usually have little value in creditors’ eyes.
- Your credit will never recover from bankruptcy
While filing for bankruptcy will temporarily hurt your credit score, it won’t do so forever. It will remain on your record for 7 to 10 years, but even during that time, you’ll likely be able to rebuild your credit score.
Some people are able to obtain new credit cards within just a few weeks of filing for bankruptcy.
- Bankruptcy is a cure-all
Filing for Chapter 7 bankruptcy allows you to rid yourself of most unsecured debts, including back rent and unpaid credit card or medical bills. Some types of debt, however, such as child or spousal support debt, and student loans, cannot be discharged.
- It’s difficult to file for bankruptcy
Because filing for bankruptcy is a legal process, many people assume it’s an overwhelming process. The reality is that if you hire a good bankruptcy attorney, the process is fairly simple.
If creditors have been harassing you, check state and federal laws regarding debt collection, and read our site here about what is ‘fair’ for debt collectors to do. Certain kinds of harassment are illegal. By letting the creditors know that you understand your rights, you may be able to get them off your back. You can also choose to seek damages from them. Read our Bankruptcy Q&A to learn more, or call us today at 361-578-7200 to discuss your options. You may also text us at 361-648-6888 seven days a week. Let us help you make the right choice for you and your family.