Finances can have the power to leave you in a very difficult and stressful situation, and bankruptcy is one financial situation that you do not want to find yourself in. Nevertheless, despite hard work and good intentions, it can still happen, and if it does, it’s important to know what your options are. What’s important to remember is that filing for bankruptcy is a responsible decision that will benefit your situation overall.
Bankruptcy myths can mislead people and even result in people avoiding filing for bankruptcy based on false preconceptions.
In this guide, we explain the various bankruptcy myths so that you can better understand your financial situation.
Why Do People File for Bankruptcy?
Individuals choose this option when they have a backlog of debts they simply cannot pay. Filing for bankruptcy means officially declaring that you have no way to pay back what you owe based on money and assets. Filing for bankruptcy means gaining a legal status for clearing your debts in this fashion.
The Most Common Bankruptcy Myths Explained
The Bankruptcy Process Can be Difficult
Like any financial process, it can seem overwhelming, but the bankruptcy process doesn’t have to be difficult or confusing. The key here is to find advice and dependable legal advice, such as through lawyer representation, so that you can fully understand the process and feel more confident. The actual process of filing for this status is quite straightforward.
The Probability of Losing Properties and Possessions in Bankruptcy is High
The bankruptcy law includes several exemptions, which means your property may be protected. Many people who file for bankruptcy will still be able to keep their property if they make an agreement to pay back some (or all) of the debt amount. The bankruptcy law is there to help protect people and not to take all property and possessions from them.
There is a Zero Chance of Getting Credit Again
Good credit can always be rebuilt, even after filing for bankruptcy. During a state of financial difficulty, your credit report will reflect this, but filing for bankruptcy and getting your finances back on track will work to improve your credit report. In fact, the official status of bankruptcy shows that you have taken action to clear debts, which always looks good in regard to credit.
It is Necessary for Married Couples to File Together
Any spouse is able to file for bankruptcy without the other. Despite being a married couple with joint finances, an individual can still declare bankruptcy without their husband or wife needing to declare it, too.
Filing for Bankruptcy will Affect a Spouse’s Credit
Despite being married, your own financial circumstances and credit report remain your own. That means that if you or your spouse file for bankruptcy, the other person’s credit will generally not be affected by this.
Bankruptcy is Pointless if You Owe Taxes
While taxes are another financial situation altogether, that doesn’t mean that filing for bankruptcy doesn’t help with income taxes.
It is true that some taxes cannot be settled in this way, but others can be. There are rules relating to which taxes need to be repaid, but this can all be explained to you based on particular circumstances by an experienced lawyer, and filing for bankruptcy is certainly not pointless if you owe taxes.
People Who File for Bankruptcy are Financially Irresponsible
There is a negative connotation attached to bankruptcy, as though it takes an irresponsible person to get into that much financial difficulty, but it’s simply not true. Anyone is at risk of financial difficulty, even the most hardworking individuals with secure jobs and a regular paycheck.
It takes a financially responsible person to know when filing for bankruptcy is the best option to support themselves, their household, or their family.
Bankruptcy Can Only Be Filed Once in a Lifetime
While more than one bankruptcy filing can be difficult, it’s certainly not impossible. Many changes can occur in life, even after a first bankruptcy filing, such as divorce or unexpected expenses, which means it’s definitely an option for more than one bankruptcy if the need arises again during your lifetime.
Not All Properties and Debts Should be Listed in Bankruptcy
Unfortunately, this is not true. It’s against the law to neglect any properties or debts from your bankruptcy list. Some people believe it’s okay to omit certain debts if they believe they can comfortably repay outside of bankruptcy, but absolutely everything needs to be listed.
Creditors Can Still Harass You and Your Family Even After Bankruptcy
This is not true. The Bankruptcy Court will issue an official order to creditors to cease any contact with you or your family after your case is filed. This order ensures that creditors are not able to take any action against you. If a creditor was to persist or harass you even after this order has been issued, you then have the right to confront the violation of terms and take them to court for compensation.
You Can Indulge on Shopping Before Filing Bankruptcy
This is a myth arising from the fact that credit card debt is dismissed during bankruptcy, so many people believe a last-minute spending splurge is possible before the debt amount is removed, but it’s not the case.
Courts will consider all charges which have been accumulated before a bankruptcy filing, and it’s considered fraud to make a spend in this way with the intention of charges being written off.
When it comes to bankruptcy, understanding what you can and can’t do will help you to feel more confident with your own financial situation. If you ever find yourself in such a situation where you need to declare bankruptcy and are preparing yourself to file this, then make sure to take note of all the above bankruptcy myths.
What matters is doing thorough research and seeking advice from an experienced lawyer, like from a qualified bankruptcy lawyer, like The Spagnola Law Firm, to ensure that you don’t receive any false information or make a bankruptcy decision based on myths.
Our representatives are happy to help with any bankruptcy claims, so please don’t hesitate to speak to us today.