Filing for bankruptcy may help you get relief from your debt and will have a significant impact on your financial life. Depending on your goals and circumstances, bankruptcy may be the most viable option for resolving your debt and starting fresh. However, there are several common myths and misconceptions many people have when it comes to bankruptcy.
Here are the five most common myths associated with bankruptcy:
This belief is merely just a small section of the bigger picture. Most people who file for bankruptcy are not totally financially irresponsible. Maybe just a few. On the other hand, there are several causes that can lead to a person to declaring bankruptcy. They include: job loss, divorce, uninsured medical bills, and more. COVID-19 also played into the fluctuation of bankruptcy cases as businesses and households suffered huge financial losses due to the impacts of the pandemic.
It is a common belief that if you were to file for bankruptcy then all your debts will completely disappear and you would have a fresh start. While this may be true in most cases, some debts such as child support, alimony, student loans, and certain tax debts, may be considered non-dischargeable debt.
It is highly encouraged that you avoid putting yourself in this sort of scenario. You will be getting yourself into a lot of trouble. The Bankruptcy laws frown upon Bankruptcy Abuses such as maxing out your credit cards in anticipation of bankruptcy. The general rule is that you must not make significant purchases on your credit cards (especially for non-essentials) within 90 days of filing bankruptcy. You should also avoid taking $1000 or more in cash advances on a single credit card within 70 days of your filing.
A bankruptcy can stay on your credit report for up to 10 years from the date you file your bankruptcy petition. However, your credit score begins to improve almost immediately after the filing. Within a year of the discharge, you should be able to qualify for a respectable credit card, car loans, and more. As for mortgage loans or refinances, you can get approval within 2-4 years. This depends on the type of loan you are applying for.
Most people believe that filing for bankruptcy is the “end-all, be-all” of getting out of debt or even the only option for debt. However, it is not for everyone.
There are two common types of bankruptcy: a Chapter 7 or a Chapter 13.
If you file for Chapter 7, all your dischargeable debts will disappear. If you were to file for Chapter 13, you will have to pay back a fraction over a 3 or 5-year payment plan. Anyone considering whether or not to file for bankruptcy should speak with an experienced and well-reviewed bankruptcy attorney. Consultations are free so you have nothing to lose.
Now that you are aware of the most common myths associated with bankruptcy, you know what the next step is!
Trying to figure out what is fact and what is fiction when it comes to bankruptcy can be a daunting task on your own. With so much information and so many myths floating around the internet, you’re likely to waste a lot of time and energy researching your options alone. Do yourself a favor and call us today at 888-886-0020 for your free consultation.