No one ever wants to think about bankruptcy, whether for business or personal reasons. However, the reality is that sometimes it’s necessary and perhaps could be a better option when it comes to huge debts. There exist myriad misconceptions regarding bankruptcy, and most of them tend to hinder some people from getting relieved. This article will focus on the three primary misconceptions regarding filing for bankruptcy.
1. If I file for bankruptcy, I will lose everything
Most people are hesitant to file for bankruptcy because they believe if they do so they will lose everything they own, including a car. Keep in mind that bankruptcy laws are complex. In some cases, you can file for bankruptcy, and you will not lose your home, car, or any other property, but this depends solely on the chapter you file.
Chapter 13 bankruptcies will cushion you from losing your home, as it is designed to protect your home from foreclosure. Besides, it eliminates second mortgages when necessary. If you qualify for Chapter 7 bankruptcy, you will not lose your home, but keep in mind that this will be influenced by how much equity and income you have. Each chapter bankruptcy has specific requirements, and therefore it is a good idea to hire an attorney who understands bankruptcy issues when filing for bankruptcy.
2. Chapter 7 bankruptcy will wipe out all my debts
Though bankruptcy laws provide options, there is no ‘blank check’ that will cover all your debts. Among the debts that can’t be forgiven is the student loan, unless you can prove that you have hardships related to disabilities that prevent you from working. Therefore, if you want to file for bankruptcy, you should be prepared to pay your student loans. Other debts that might not be forgiven include criminal fines, child support, and other penalties.
3. Once I file for bankruptcy, I will never earn credit again
Though bankruptcy stays on one’s credit report for about ten years, it doesn’t mean that you will never earn credit again. Note that it takes approximately six months to reestablish credit. One of the best options is to accept any of the frequent credit card offers that are sent to your email. Though this credit line is low and the interest rate might be high, using the card to make frequent small purchases can begin restoring your credit.
In this era, consumers cannot run from the possibility of experiencing bankruptcy. Moreover, misconceptions on filing bankruptcy worsen the problem faced by the person. It gives the person a false truth about whether to file bankruptcy or not.
It may be an unfortunate event, and as hard as it may seem, you need to file for bankruptcy. Filing for bankruptcy may provide the most practical and achievable solution to your financial problems.
Most of the misconceptions on bankruptcy are due to the lack of awareness and knowledge on how to deal with financial predicaments. However, you can resolve such misunderstandings by thoroughly examining the facts and truths about bankruptcy and asking for advice from your lawyer on how to deal with it.
There is always a way of handling this kind of devastating financial predicament. Thus, a person undergoing bankruptcy must be aware and be able to understand that bankruptcy is a financial alternative. It is considered as an alternative because once you file for bankruptcy, a notice will be sent to your creditors informing them to stop trying to collect money from you.
Additionally, it prohibits creditors from sending collection letters, garnishing your wages or seizing your assets. Filing bankruptcy can also help you with the discharge of certain debts. Through understanding the facts about bankruptcy, you can properly evaluate its potential benefits and address the problem.
Beatrice Santos is taking units in business law and currently affiliated as an intern in a local law firm. She is passionate in helping those who have any queries regarding business laws and how these may affect their respective businesses.