5 Common Bankruptcy Myths
Millions of consumers file bankruptcy every year and while those who file have their own reasons why, others may assume a filing was done for reasons that may not be true. Some people have certain beliefs about why consumers file for bankruptcy protection, with different myths often keeping people from seeking their own form of financial relief.
Below is a look at common myths often assumed when someone files bankruptcy:
- "People who file for bankruptcy protection don't manage their money well or have good financial sense." Some people have been known to frivolously spend their money on silly purchases but in many cases, those who file bankruptcy have personal issues they are dealing with such as a medical condition, job loss, reduction of income or change in family status.
- "All debt can be discharged in bankruptcy." While it's true that filing may give a fresh start, certain types of debt is non-dischargeable. Some tax debt , criminal fines & restitution and support obligations such as child or spousal support may not be eligible for discharge.
- "You can charge up your credit cards before filing and get the outstanding balance discharged." Certain types of spending right before filing a bankruptcy petition may be considered fraud by the court, and a discharge of those debts is less likely.
- "Your credit is permanently damaged by filing bankruptcy." Many who file have been surprised by how soon they are able to obtain credit, with many building good credit histories shortly after obtaining a discharge.
- "Bankruptcy cures all person financial problems." While the process can help you deal with your debt obligations, whether you file Chapter 7 bankruptcy or Chapter 13 , each chapter has its own unique way of solving certain financial issues. Consumers also play a role in making sure they can stay in control of their finances after getting debt discharged.
As always, any questions and concerns should be reviewed with an experienced bankruptcy professional.