There are many people out there who are brave and decide that filing for bankruptcy is the right move for them to clear out their old debts. You may think that it is facetious to call filing for bankruptcy a “brave” act, but given the reputation bankruptcy has, it truly is a huge step to take. There are also many myths surrounding the process of bankruptcy, and we want to dispel a few of them today.
The first is that people who file for bankruptcy have “failed.” This couldn’t be further from the truth. In many bankruptcy cases, the people who file have been overwhelmed by a sudden financial cost. This usually happens with a medical emergency, where the medical bills and the debt associated with the cost leave the individual with no way to adequately cover them.
Another myth is that you will lose everything as a result of the bankruptcy. This is not true. You may lose some assets through the liquidation process of a Chapter 7 bankruptcy filing, but there are exemptions you could utilize to protect your most valuable assets. Chapter 13 bankruptcy, meanwhile, utilizes a repayment plan to help the in-debt individual restructure his or her debt into a more manageable portfolio.
Last but not least, many people think that filing for bankruptcy means that their financial life is over forever. But again, this isn’t true. Many new lines of credit will become available to you in the time after your bankruptcy is finalized and completed.
Source: NerdWallet, “5 Bankruptcy Myths Dispelled,” Sean Pyles, June 7, 2016