Myths and misunderstandings surrounding bankruptcy cause confusion to what may already be a seriously stressful situation. One of the reasons why bankruptcy seems so scary and stressful is because of all the misconceptions that are widespread about it.
Many people can hardly spate truths from hardcore exaggeration when it comes to topics about bankruptcy. Changes in laws and misinterpreted stories often cause myths to develop and spread quickly.
Harmful bankruptcy myths prevent people from relieving their debts. Popular misconceptions about this necessary process include:
- Bankruptcy will kill your credit forever– when you file for bankruptcy, your credit will be affected, and you may not get access to it for a long time. Moreover, your bankruptcy report will remain on your history for the next seven to ten years. However, this is not to say that the effects are permanent. Your credit will be far from doomed with the proper time. You are likely to receive credit offers within weeks of your debt discharge.
- You can spend as much as you want right before a bankruptcy filing and get away with it– because credit card debts are erased with a Chapter 7 filing, people believe that you can spend as much money as you want a few days to file for bankruptcy and will not have to pay for it. This is a common myth that you should not fall victim to. Courts have concluded that raking up charges right before you file for bankruptcy is a fraud. Moreover, a debt incurred as a result of fraud cannot be discharged.
- You will lose everything in bankruptcy– people think that filing for bankruptcy will leave them on the street with nothing but the clothes on their back. This is far from reality. In reality, even with a Chapter 7 bankruptcy, you will only lose a fair amount of things. Unnecessary luxurious items are sold to help clear debts, and people get to keep their houses in the right circumstances.
- You can only file for bankruptcy once– it happens, you may find yourself in a difficult financial situation more than once in your lifetime. However, many people believe that you have only one chance to file; after that, you are done. This is not true. According to law, you can file Chapter 7 bankruptcy once every eight years. Since Chapter 13 bankruptcies take three years to complete, you can register for a new Chapter 13 immediately after your previous reorganization ends.
- Only evil, irresponsible people file for bankruptcy– this is the biggest misconception about bankruptcy. The stigma that comes with his process is based on the belief that you are careless or a thief who could not pay their bills. However, this is not true. There are thousands of bankruptcy cases each year, and many of these people are competent, honest individuals who find themselves in bad situations. Moreover, reasons such as overspending on luxury items are not at the top of why people go bankrupt. Legitimate issues such as medical bills, job loss, and divorce are the top causes of bankruptcy.