There is a lot of misinformation out there about bankruptcy, and if you believe that inaccurate information, it might stop you from filing. Bankruptcy exists to protect people when their debt reaches a point where they can’t control it or when they unexpectedly lose their income, making what was manageable debt an impossible burden.
When you learn how inaccurate some of the stories about bankruptcy are, you may feel empowered to file and regain control over your finances.
Only poor and irresponsible people file for bankruptcy
The social stigma surrounding bankruptcy means that people assume certain things about those that file. It is a common misconception that the only people who file are those who have very little income and no resources. Truthfully, successful professionals with six-figure incomes often need bankruptcy because funding a lifestyle that helps them appear professional may cost more than they earn.
Irresponsibility doesn’t always lead to bankruptcy either. A drunk driver hitting you during your daily jog, a diagnosis with cancer or your employer going out of business could all be situations that pushed you to bankruptcy within a few months.
Bankruptcy will cost you everything you’ve acquired
Bankruptcy does sometimes require the liquidation of your personal assets. In a Chapter 7 filing, you can exempt some of your property, but the trustee overseeing your bankruptcy May order the sale of other assets that are not exempt.
Many people who file for bankruptcy don’t qualify for Chapter 7 bankruptcy and must look into Chapter 13 bankruptcy and instead. Even if you qualify for a Chapter 7 filing, Chapter 13 bankruptcy could help you protect significant assets, like the equity in your house or your vehicles.
Bankruptcy will mean that you won’t qualify for credit ever again
Bankruptcy, like any other blemish, will eventually come off of your credit report. If you file a Chapter 7 bankruptcy, it will come off of your report 10 years after your discharge. A Chapter 13 bankruptcy will be off of your report seven years after your discharge. With either kind of bankruptcy, you may qualify for credit cards within months and bigger loans like mortgages within a few years even while the bankruptcy is still on your credit report.
Bankruptcy does not have to diminish your financial circumstances or humiliate you. Learning the basics of personal bankruptcy could motivate you to file and help you regain control over your debt.