Filing for bankruptcy is a difficult decision that can be just as emotionally distressing as it is complicated seeming. Although it can feel like an extreme measure, it’s often the best recourse for pulling yourself out of a financial labyrinth.
Some people avoid declaring bankruptcy because they’ve fallen under the spell of some common stereotype and myths about bankruptcy and the people who choose to file it. Others may erroneously believe bankruptcy can provide an end-all solution to certain problems.
Setting the facts straight
The reality is that bankruptcy is the product of a complicated and unpredictable economy. Here are four of the most common bankruptcy misconceptions:
- Your credit score will be forever ruined. Not only is this far from true, but it actually contradicts what bankruptcy is intended to help fix. It will take time—7 to 10 years, possibly—but your credit will experience an upswing as you work to build it from a blank slate. It’s even a great opportunity to apply for a low-stakes credit card to begin establishing it.
- You’re a failure or irresponsible. Filing for bankruptcy isn’t something anyone strives for, and you can’t typically just walk into an attorney’s office and hire them to help you declare bankruptcy. Usually, the decision is the result of much more than a few bad decisions or poor choices. With job market instability, rising medical debts, and other economic factors, it’s easier to find yourself in need of a bankruptcy declaration than you might imagine.
- You’ll lose all of your possessions. While it’s true that some things will be lost—in chapter 7 bankruptcy, you’ll almost certainly lose the yacht or other luxury goods—you won’t lose your basics, like your house, your vehicle, and your personal belongings. Being realistic about what assets are utility and which are luxury will assist you in making sense of this.
- You’ll be released from all of your loans. While it’s true that chapter 7 and 13 bankruptcy relieves most forms of debt, there are exceptions to be aware of. Student loan debt, for instance, is only forgiven in extremely particular and extreme circumstances. Things like taxes and child support are also typically ineligible for bankruptcy relief.
If you’ve taken the step of recognizing that bankruptcy might be the best option for you, you’re already on your way to creating a better future for yourself. Contact an attorney to help you work through your bankruptcy decision.
Most importantly, let go of your shame. Life is unpredictable, and bankruptcy is more common than you think.