Bankruptcy has earned a reputation that leads many people to look down on the process, and people who choose to use it. There are many myths about bankruptcy and those who use it. By dispelling these myths, people can understand how beneficial bankruptcy is to those who need it most.
Nearly 500,000 people filed for Chapter 7 bankruptcy in 2019 as a way to survive massive financial debt. All of these people were able to look past the myths about bankruptcy and get a clean slate to start over with. Knowing the truth behind these common myths can be the information someone needs to free themselves from a terrible situation:
I will lose everything I own with bankruptcy
This statement is not accurate. In Chapter 7 bankruptcy, an applicant does need to sell off any non-essential assets like a second home or valuable art and jewelry. While an applicant does need to use this money to offset the debt they have, they can keep essential assets like a primary home or vehicle depending on equity in each. An applicant can also pursue Chapter 13 bankruptcy and avoid losing any assets altogether in exchange for paying off all of the debt on a payment plan.
Bankruptcy is for failures
This idea is also not accurate. One of the most common forms of debt is medical debt. When a person needs tens of thousands of dollars or more in treatment, how can they be at fault for getting the treatment they need? No one should fault another for getting sick and wanting to get better. Many other situations can lead to considerable amounts of debt that bankruptcy can help remove.
Bankruptcy destroys credit scores for life
While bankruptcy does stay on a credit score for several years, and it can negatively impact a credit score, it is not a permanent consequence. It is also possible for lenders to consider an applicant a safer risk because the applicant has a lower debt-to-income ratio. Credit scores are a constantly changing thing, and they will recover after a person files for bankruptcy.
Bankruptcy cannot help me
Hundreds of thousands of people benefit from bankruptcy. If you are unsure about how bankruptcy can help you, contact a bankruptcy attorney. Their guidance can help you understand how you can recover from debt, and what options are best for your interests.