It can be challenging to accept that it’s time to file for bankruptcy. Nonetheless, considering its benefits (getting a fresh start, avoiding lawsuits and stopping endless calls from creditors) can make the decision more manageable.
It’s important to be informed about the steps you need to take if you file for bankruptcy. Misinformation is one of the issues people who want to file for bankruptcy face. Let’s start by debunking three popular bankruptcy myths.
Myth #1: All debts will be discharged
Bankruptcy does not discharge all debts. You may need to repay some, including certain types of tax claims, debts for child support and alimony, court fees, fines, penalties and debts not included on the lists and schedules filed with the court.
The type of bankruptcy you file will determine non-dischargeable debts. Some debts are dischargeable in Chapter 13 bankruptcy but not in Chapter 7.
Further, if any creditors file an objection to your discharge, you may need to repay some or all debts, particularly when filing a Chapter 7 bankruptcy. With this option, you don’t have an absolute right to a discharge.
Myth #2: You can’t rebuild your credit
Undeniably, declaring bankruptcy can affect your credit. Your credit score will drop, and the information will stay on your credit report for some time. However, this does not mean you can’t rebuild it. With careful planning and actions, you can rebuild your credit.
Myth #3: You will be viewed as reckless
Filing for bankruptcy is associated with being financially irresponsible, but this is not always the case. You may find yourself in considerable debt after losing your job or due to medical bills or divorce-related expenses. As more people realize this, you may receive more support than expected.
If you are considering bankruptcy, it is best to get experienced legal guidance. This will help you better understand the process and your options.