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Four Bankruptcy Myths Busted

Posted By Allmand Law Firm, PLLC || 15-Jul-2015

Every year, over one million people file for bankruptcy. While some people might assume that filing means that a person can’t control their spending habits (in some cases this may be true, but certainly not all), there are plenty of other good reasons why a person might choose bankruptcy. Below, we have identified and busted the top four myths about bankruptcy.

  1. Bankruptcy will eliminate all past debts. People may mistakenly think that filing for bankruptcy will provide them with a “fresh start,” and that they won’t have to pay back any of the money they have owed. However, several types of debt, including alimony, child support, restitution payments, and even student loan payments, are not discharged by bankruptcy, and you will still be responsible for paying them. If you have kept up with filing your taxes, there is a chance that any tax debts you have may be reduced or eliminated, but if not, you will still be responsible for these debts as well.
  2. Bankruptcy will destroy your credit permanently. Your credit will take a hit, but it is only temporary, and you will find that you will very soon be receiving credit card offers through the mail once again. In order to rebuild your credit, take advantage of a secured, low-limit credit card and start making regular, on-time payments. Within a year, switch to a regular credit card and continue making payments. As long as your payments are not late, your credit score will improve.
  3. Spending sprees right before filing for bankruptcy won’t have to be repaid. Courts consider this to be fraudulent activity, and any debt that you rack up through fraud is not dischargeable. You will still be responsible for repayment even if you have filed for bankruptcy.
  4. Those who file for bankruptcy can’t control their spending and are financially irresponsible. This simply isn’t the case for many well-intentioned Americans. A person who files for bankruptcy does not necessarily always have a spending problem. Personal problems like a long-term serious illness, an expensive divorce, or losing one’s job can cause even the most responsible people to have serious financial issues that can only be solved by bankruptcy.

Bankruptcy is not meant to be a financial cure-all, but it can benefit many people who are struggling to regain financial control once again. Bankruptcy does not define a person, and there is always hope to regain financial freedom. If you are considering filing for bankruptcy, call Allmand Law Firm, PLLC today and sign up for a FREE financial empowerment session to learn more about your options.

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