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What are common myths of bankruptcy?

On Behalf of | Nov 15, 2021 | Bankruptcy

Many of us struggle with financial hardships. Whether the difficulty comes from medical emergencies, sudden job loss, or anything else, even the most frugal people can find themselves suddenly overwhelmed with debt. Bankruptcy offers a solution for many types of debt, including credit card and medical debt.

Although more than 500,000 people apply for bankruptcy each year, many people still do not pursue bankruptcy because of misinformation. There are many myths about bankruptcy, and to help you make an informed decision about your financial needs, this article will dispel a few of the more common myths here:

Bankruptcy will ruin my credit

It is true that a credit score will lower after bankruptcy; the change is not permanent. Healthy spending habits will help your credit score return to its original value or even improve in a matter of a few months or more.

I will never be able to have another credit card

You may be surprised to learn the opposite of this myth is true. After discharging your debt with bankruptcy, your debt-to-income ratio is often so good that many credit card companies will offer you a new card.

Bankruptcy will get rid of all my debt

There are two forms of debt: secured (debt with collateral, like a mortgage or car loan) and unsecured (debt with no collateral, like credit card or medical debt). Bankruptcy can only help with unsecured debt and not secured debts like student loans.

Bankruptcy will take all my assets

Chapter 7 bankruptcy only requires an applicant to sell non-essential assets, like a second home or car, heirlooms, and collectibles. Chapter 13 bankruptcy allows you to keep your assets, as it restructures your payments, rather than discharges everything.

It is too complicated to file for bankruptcy

Bankruptcy is not without its challenges, but it is certainly manageable with the assistance of a skilled bankruptcy attorney. A lawyer’s guidance can help you secure the results you need to take back control of your finances quickly and efficiently. If you are considering filing for bankruptcy, consult with an experienced attorney for more information about the process.