Four Common Myths about Bankruptcy

Four Common Myths about Bankruptcy

As a result of many misconceptions and myths about bankruptcy; unfortunately, people won’t even consider filing as a possible solution to their debt problems. However, bankruptcy may indeed provide the most feasible and practical solutions to someone’s financial mess. Some common myths include: Everyone will know about it. You’ll lose everything. It’s only for deadbeats. It’s too hard to file. Many more myths are out there, but we’ll focus on four common myths below from our Bankruptcy Made Simple: A Guide to filing for Bankruptcy in New Jersey e-book (download your free guide now!):

Myth 1: Filing for Bankruptcy Means You’re Irresponsible

The prevailing myth is that many people filing for bankruptcy are simply irresponsible, and are completely at fault for their financial dilemma. However, many people who file for bankruptcy have been affected by legitimate, unforeseen circumstances. For example: long term unemployment, divorce, or the result of medical debts.

Myth 2: You Will Lose All of Your Assets During a Bankruptcy

Although filing for bankruptcy can certainly relieve many financial burdens, it can also have negative long-term consequences, such as loss of your home and other property. However, there are exemptions that can help you protect certain assets such as a house, car, or retirement plan. Your lawyer can discuss these exemptions with you in detail, and file the necessary paperwork to ensure that your key assets are protected.

Myth 3: A Bankruptcy Will Remove All of Your Debts

Another common myth is that bankruptcy will discharge all of your debts. However, ongoing payments for domestic support, such as alimony and child support, are non-dischargeable. You also cannot be discharged of debts due to negligent or criminal behavior on your part, such as causing personal injury or death. The courts also penalize debtors who are shown to have recklessly charged large amounts on their credit cards right before filing their bankruptcy petitions. This is considered fraud, and debts incurred through fraudulent means cannot be discharged.

Myth 4: Bankruptcy Permanently Damages Your Credit

One inevitable long-term consequence of bankruptcy is damage to your credit. All Chapter 7 bankruptcy information stays on your credit for 10 years, and all other bankruptcy records remain for 7 years. Credit scores (with responsible sending and credit management) can start to improve in as short as three months. This credit damage is not permanent though, especially if you take the right steps to build up your credit back up. By working out a post-bankruptcy plan with your lawyer, it is possible to improve your credit score and qualify for major purchases such as a house within a few years.

Consult with a Bankruptcy Lawyer

Often, preconceived notions of bankruptcy either prevent debtors from taking action, or cause them to suffer long-term damage brought on by an unnecessary bankruptcy filing. An experienced attorney can advise you on these alternatives and help you decide if bankruptcy is truly your best option. Call an experienced bankruptcy attorney from Villani & DeLuca, P.C. today for a free initial consultation at 888-389-9533.  Villani & DeLuca Of Counsel attorney Robert H. Johnson has years of experience in consumer bankruptcy and can help you determine the best course of action to resolve your financial problems.