We have collected the most common and controversial myths and opinions about filing for bankruptcy to finally make it clearly explained. So, if you are still in doubts whether you should file for bankruptcy and the roots of the doubts lie in a lack of unbiased information, our review will come in handy.
Myth #1: Bankruptcy is the worst option.
Not at all. In many cases, the decision to keep paying debts, depriving you and your family of any chance to have a decent life, is way worse than bankruptcy. If you feel and realize that debts’ burden is unbearable, filing for bankruptcy makes a real chance to start a new life. Besides, there are some Chapters which allow debts repaying delay instead of full bankruptcy as it is. For example, you may consider filing for Chapter 13 bankruptcy (if your median income allows you to file for it).
Myth # 2: You will lose everything you have.
You will only loose so-called exempt property that includes a house, a car (an expensive one) and other major assets. Those assets will be sold and money distributed among creditors. However, the law allows you to keep some “modern necessities” like clothing, an inexpensive car, some furniture, your personal stuff and so on. A professional bankruptcy attorney may win for you the lion part of your possessions if everything will be done right. Anyway, you will definitely not lose everything you have.
Myth # 3: All debts you have will be written off.
When it comes to the most popular bankruptcy Chapter (Chapter 7), you may not realize that not all types of debts can be discharged. Debts like student’s loan, taxes and some other types (read here for complete list) cannot be written off and you will still be responsible for paying them back.
Nevertheless, most types of non-secured loans will be written off in a case of your bankruptcy approval. Secured loans cannot be discharged by filing for bankruptcy.
Benefit # 1: You receive a huge debt relief and a chance to start a new life.
Despite the bankruptcy procedure being really stressful, it is still worth it as you will be free from the much heavier burden on unbearable debts. You will get rid of the endless trap of trying to find money to pay interests on loans. You will be given a chance to start your life from the blank sheet without a constant threat of being sued for not paying your debts.
Benefit #2: You will still be on track in some time.
Bankruptcy will, of course, take you off the normal life for a definite period, but it will not last your lifetime. The record about your bankruptcy will stay public for several years and after that, no one will ever know or suspect you were bankrupt. After receiving your bankruptcy approval you will still be able to get a job, rent an apartment and live a normal life. Besides, without having a chance to get a high-interest bank loan again you will learn to manage your lifestyle without borrowed money.
Benefit #3 Bankruptcy will teach you financial discipline.
Bankruptcy is a great lesson. It teaches everyone to be careful with the money and think twice before getting another loan. You will learn to plan your monthly budget precisely and rely on the money you have earned. This lesson may do you the biggest favor and even become a fundament of your successful future.
Risk #1: The fact you are bankrupt will go public.
Yes, that is the most unpleasant part of going bankrupt. Social stereotypes are still very common so the fact that everyone may find out about your bankruptcy will make you feel somewhat socially abandoned. Yet, such bankruptcy records stay in official sources not longer than 6 years, so just be patient and keep living your life. Remember, it can happen to anyone, and your bankruptcy is not a reason to withdraw yourself from social life completely.
Risk #2: You credit score will be lowered dramatically.
Obviously, after your bankruptcy, your credit history and a credit score will be lowered significantly. Bankruptcy will affect your chanced to get new loans as lenders will not see you as a reliable borrower anymore. Anyway, you may still lend money from private online investors but don’t let the temptation of getting easy money put you to that debt trap you have just jumped out. There is a plus in it: you will learn to live in full accordance with your actual earnings.
Risk#3: You may face complications with getting a job.
Reasonably some employers will tend to avoid potential workers who have a bankrupt status. They will not tell you this officially. But they will find hundreds of reasons to refuse you. Still, it’s not a time to give up. You will find a job eventually, and, month by month your life will start gaining its abundance again.
Show yourself as an enthusiastic worker and your eagerness will finally outweigh all prejudgments.
Pitfall #1: Your cosigners will not receive debt relief.
If you have taken a loan where a cosigner is involved (a person who shares the responsibility of repaying the loan), he/she will not be freed from the financial obligations. That means that bankruptcy is given to you solely and relates to yours only financial obligations. Other people who were your cosigners (your parents, friends) will still be responsible for paying that certain loan back. Therefore, before involving a cosigner into your loan’s Agreement, you should always notify them about that pitfall in a case of your bankruptcy. Pitfall #2: The court fee will not be returned in a case of failure.
Filing for bankruptcy requires you to pay the fee to the U.S. court. Different Chapters require the different amount of money to pay. Not everyone knows that in a case you have failed to have your bankruptcy approved, you will not receive the fee back. That is why you have to be prepared to the process the best. Hire the special bankruptcy attorney to help you to fill in the forms with accuracy. After all, the fee you will pay to an attorney will pay off by bringing your bankruptcy approval with the first attempt.
Pitfall #3: Your bankruptcy may not be approved due to one single error in papers.
All the forms which you have to fill in must be done with the highest degree of accuracy. One single mistake in calculations of your income of debt’s interest, and your attempt is failed. Moreover, you should include into your debts list all loans you are unable to pay.
Otherwise, if you have forgotten about a certain loan, after receiving the bankrupt status you will still be obliged to pay that loan back.
Become 100% prepared and allow no negligence, as it may cost you a chance to improve your life.