According to the Administrative Office of the United States Courts, at least 500,000 people in the U.S. file for personal bankruptcy each year. Even though that number is so high, bankruptcy is not talked about frequently and is often seen as a shameful or embarrassing thing to go through. Because of the relative silence surrounding filing for bankruptcy, myths abound about the impact that bankruptcy has on a person or their finances. Consider these four common myths and the truth behind them.
Myth 1: You’ll Be Free of All Debts After Filing
One common misconception is that following either Chapter 7 or 13, you will be relieved of all your debts. This is untrue. While you will find relief from most of your debts (credit card balances, personal loans and medical bills), by filing for bankruptcy, you will still be responsible for personal debts, which include child support, taxes and any court rulings related to fraud. Additionally, you will likely still be responsible for any student loans you have.
Myth 2: You Will Lose Everything
Some people are afraid to file for bankruptcy because they believe they will have to forfeit their car, house and personal assets. Assets necessary for living, such as a house, are typically considered exempt, which means you’ll be allowed to keep it. However, if you have a luxury vehicle, the court may require you to put it up for auction. What about expensive equipment you have, such as a surround-sound system for your OLED television? Most creditors don’t want to deal with auctioning items like that off, so you’ll probably be allowed to keep them. If you’re concerned about what will stay and go, talk to a bankruptcy lawyer Rockville MD.
Myth 3: Your Financial Future Will Be Ruined
Filing for bankruptcy does not signal the end of your financial future. It’s the opposite: an opportunity to start fresh unencumbered by stressful debt. Yes, you will have to rebuild your credit and will probably even see an increase in interest rates on credit cards and personal loans, but your credit score will come back if you pay your bills on time.
Myth 4: You Are Bad With Money
There is so much judgment surrounding bankruptcy, but did you know that nearly 60% of people who file for personal bankruptcy did so because they had crippling medical debt? Regardless of your financial situation, filing for bankruptcy should not be considered a personal failure but a chance to free yourself of unmanageable debt.