Are you in a financial rut? The current pandemic has led to millions of people dealing with the consequences of unemployment. Add in those who are barely holding on, have had their hours cut, are racking up medical debt, credit card debt, and the divorced, and you’ve got a perfect melting pot for financial ruin or hardship.
Some people who have to file for bankruptcy have spent with abandon for years without considering the financial consequences. On the other hand, many individuals or married couples who decide to register due to happenings outside of their control. Whatever led to your hardship, you deserve relief and a second chance.
Bankruptcy: Fact or fiction?
Statement 1: Filing for bankruptcy with terminally ruin your credit.
No matter your credit score before bankruptcy, it will be significantly impacted for seven to 10 years after you file. As long as you avoid financial setbacks mistakes and follow the guidelines of your bankruptcy agreement, you’ll is your score slowly start to recover after a certain number of years, depending on whether you file for Chapter 7 (liquidation bankruptcy) or Chapter 13 (Reorganization bankruptcy). Those who qualify for Chapter 13 will see recovery more quickly than Chapter 7 filers.
Statement 2: Bankruptcy can discharge all debts
The following debts are not dischargeable through bankruptcy:
- Child support
- Criminal restitution
- Most student loans
Bankruptcy court decides tax debt reductions or discharges on a case-by-case basis, but if you are trying to red rid of tax debt but you didn’t file tax returns, that’s not going to work.
Bankruptcy is a disruption and will force you to live very modestly for a minimum of three to five years. After those first few years, you should still be living on a budget that fits your income level in hopes of not having to re-file.