Bankruptcy often carries a heavy stigma, making many people hesitant to consider it as a viable option for managing overwhelming debt. However, for those struggling with insurmountable financial burdens, it can be a lifeline to a fresh start.
Much of the stigma stems from widespread misconceptions about the process and its consequences. These myths can prevent people from seeking the help they need. Let’s address five of the most common bankruptcy myths and uncover the truth behind them.
Myth #1: Bankruptcy will ruin my financial future
Contrary to popular belief, filing for bankruptcy doesn’t spell doom for your economic future. While it does impact your credit score initially, many people see their scores rebound within a year of filing.
You can start rebuilding your credit immediately by using secured credit cards and making timely payments. With responsible financial management, you can work towards restoring your creditworthiness and securing loans in the future.
Myth #2: It’s all my fault
Filing for bankruptcy isn’t always a result of poor financial decisions. Many instances stem from circumstances beyond your control, such as medical emergencies, job loss or economic downturns.
In fact, medical bills are a leading cause. It’s important to remember that bankruptcy is a legal tool designed to help people regain financial stability, regardless of the reasons behind their debt.
Myth #3: I’ll lose everything
You won’t necessarily lose all your possessions when you file for bankruptcy. In most Chapter 7 cases, debtors keep most or all of their assets. Bankruptcy laws allow for exemptions, which protect certain types of property.
In New Jersey Chapter 7 filings, you can keep a portion of home and vehicle equity, personal property and 100% of retirement and other financial assets.
In Chapter 13 bankruptcy, you typically keep all your assets while restructuring your debts into a manageable repayment plan.
Myth #4: Bankruptcy forgives all debts
While bankruptcy can provide significant debt relief, it doesn’t erase all types. Bankruptcy typically doesn’t discharge certain obligations, such as taxes, child support, alimony and most student loans.
However, credit card balances, medical bills and personal loans are often forgiven. It’s crucial to understand which debts are eliminated before deciding to file for bankruptcy.
Myth #5: Bankruptcy is the only way to pay off past-due debts
Bankruptcy isn’t always the best or only solution. Other options include debt consolidation, negotiating with creditors or working with a credit counseling agency.
Each situation is unique, and what works for one person may not be the best choice for another. It’s important to explore all available options and understand their implications before deciding on a course of action.
Find the plan that fits your needs
Bankruptcy and debt management can be challenging and complex. Seeking guidance from a knowledgeable bankruptcy attorney is crucial to understanding your options and making informed decisions.
Your lawyer can help you determine the right choice for your situation and guide you through the process of restoring your financial health. Remember, bankruptcy is a tool designed to help you regain control of your finances and work towards a more stable future.
