If you are strongly considering bankruptcy, you need to quickly separate fact from fiction. There are many bankruptcy myths that can get in your way, all of which can worsen your financial situation as opposed to making it better.
Here are five of the most common bankruptcy myths:
- You will lose everything: This is myth number one, as many people believe that a bankruptcy filing will result in losing every last asset. With many exemptions in place, you may come to find that you're not going to lose nearly as much as you thought (if anything).
- All your debt will go away: Even if you file for bankruptcy, there is no guarantee that all your debt will be wiped clear. For example, bankruptcy has no impact on student loan debt and back taxes. Also, with Chapter 13 bankruptcy, you're required to repay some or all of your debts through a repayment plan.
- It's best to avoid bankruptcy altogether: As you learn more about the pros and cons of bankruptcy, you may begin to believe that paying off your debt is the best strategy. You should consider this, but don't assume that bankruptcy is a bad thing.
- Filing for bankruptcy means you're a bad person: Sure, you may have made some financial mistakes in the past, but it doesn't mean you have failed as a person. In fact, taking the initiative by filing for bankruptcy shows that you're trying to make things right.
- Bankruptcy will ruin your finances forever: A bankruptcy filing on your credit report is not ideal, but it doesn't have to stop you from reaching your future financial goals. As time goes by, you're able to do things to improve your credit score. For example, using a secured credit card will get you back on track.
If you begin to believe these bankruptcy myths it's possible you could go down the wrong path. By the time you consider bankruptcy again, you may find that you're facing even more difficulties.
Learn more about the pros and cons of bankruptcy, the steps to take to get started and the impact it will have on your life now and in the future. When you forget about the myths and focus on the process itself, everything will come together.