Many people have this twisted view of bankruptcy, like it is a dreaded financial remedy that should be avoided at all costs. While it is not an easy decision, it can be used as a tool to help people out of financial crisis so they can enjoy a fresh start. One major myth regarding bankruptcy is that people sometimes have this perceived notion that all people who file for bankruptcy are financially irresponsible and cannot handle the temptation of a credit card.
The truth is, that many bankruptcy petitions are actually filed for other reasons, mostly personal problems or circumstances that they are going through at that time. Losing a job, suffering an illness or injury or going through a divorce are all valid reasons to be short on money. Unemployment is a big problem in the United States, in April 2012 there was more than 5.2 million Americans that were going on longer than six months of unemployment. Nearly 20% of all American families have had trouble keeping up with their medical bills in 2012 as well.
Another common myth pertaining to bankruptcy is that all debts will be discharged, despite their secured or unsecured nature. Unfortunately, bankruptcy will eliminate most debts, but there are certain types of debt that are exempt including alimony payments, child support payments, restitution for a crime, DUI debts and things of that nature. All other unsecured debts that are included in your bankruptcy petition should be eligible for discharge. Student loans for example, are typically forgive if you can prove that you have a serious hardship such a permanent disability or something.
To clear up another issue so you are not mistaken, it is not legal to rack up your credit card bills and spend excessively before filing for bankruptcy. Many applicants assume that no matter how much debt they rack up before filing for bankruptcy, it will still be eliminated during the bankruptcy process. This is considered to be bankruptcy fraud and as a result those debts with not be discharged.
Lastly, there is a common misconception that bankruptcy permanently ruins your credit and there is no coming back from the damage that it ensues. Yes, bankruptcy does remain on your record for a ten-year period, but many applicants are able to obtain a secured credit card and begin to rebuild their credit after only a month after their debt discharge. In fact, many people see a huge improvement in their credit score in as short as two years. As long as you regularly pay your credit card bills, then you will see your score improve.
If you have a question regarding the truths and myths regarding bankruptcy, be sure to ask an expert and get a professional opinion. If you are considering filing for bankruptcy, contact our Butte County firm today for a free