Bankruptcy is defined as a legal process that takes the burden of debt off the debtor while creating a payment, or repayment plan, for creditors. Some view filing for bankruptcy as an admittance of defeat, while others see it as a way for irresponsible people to get help that they don’t deserve. In truth, neither of these ideas is accurate and can scare off people who need help. This article will review and debunk the top five myths about filing for bankruptcy.
Those Who File for Bankruptcy Aren’t Financially Responsible
There are myriad reasons why someone may need to file for bankruptcy, to the point where listing out all the reasons would take quite some time. In fact, in most cases, those who file for bankruptcy are quite the opposite and have simply been dealt a bad hand. The loss of a job, medical bills, divorce, and other unforeseeable emergencies can land someone in serious financial trouble through no fault of their own.
Everyone Will Know That You Filed for Bankruptcy
Some believe that because filing for bankruptcy goes into the public record, that means it goes into public knowledge, which is simply untrue. The truth is the only people who will know are the creditors. Someone would have to be really dedicated to tracking down information about you to find out you’ve filed for bankruptcy.
Filing for Bankruptcy Will Permanently Ruin Your Credit
Arguably, this is one of the most common bankruptcy myths. In most cases, with the right changes, your credit can quickly improve. Bankruptcy only stays on your credit report for about 10 years, and many reestablish their credit easier and faster than before. In some cases, people have been able to reset their financial habits and improve their credit in as little as two years.
You Can Spend a Lot of Money Before Filing for Bankruptcy
Spending all your money recklessly before filing for bankruptcy in the hopes that you won’t have to pay it back is known as presumptive fraud. If you take a cash advance on a credit card of $1,000 within 70 days or spend over $800 on luxury goods and services within 90 days of filing, that’s a problem. You can be barred from filing for bankruptcy or end up with some jail time on your hands.
You’ll Lose All Your Assets if You File for Bankruptcy
There are federal and state laws in place to protect your assets and shield a large portion of your property. The intention of filing for bankruptcy implies that you’re trying to get back on your feet, and lawmakers, creditors, and the bankruptcy court understand that it would be impossible if you had to start from zero. You will be able to keep your personal belongings as well as your home and vehicles.
With these myths about filing for bankruptcy finally debunked, hopefully, you feel a little more confident in making the right financial decisions for you. If you’re still unsure or need some advice on how to proceed, Northern Legal can provide you with a bankruptcy lawyer in Amarillo, Texas to give you the legal advice you need.