One of the reasons we fear bankruptcy so much is because of the myths about it that we believe to be true. Hence, if we face a bankruptcy case or even just think about it, we’re horrified to the bones!
Bankruptcy is a terrifying situation, but it isn’t as terrifying as you think. At least, not when you come to know that some of your beliefs about it are just over-exaggerations or even completely false.
In this article, we listed the 4 most common bankruptcy myths, so you know which one is the lie and which is the truth.
Myth #1: The debtor loses everything
This is our most common believed myth: that bankruptcy means losing everything. We believe so because of horror stories of debtors crushing down after he/she filed for bankruptcy. That is actually an over-exaggeration.
The truth: you can protect your assets and properties and avoid losing many or even all of them, given that you have the proper economic powers – if you have sufficient assets and money – to do so.
Bankruptcy cases are actually different; you can select the repayment or business restructuring plan if you’re eligible and have the actual means to repay your debts while keeping your other assets and properties intact.
If you’re a business owner, especially if you own a partnership or corporation, you could be eligible for Chapter 11 Bankruptcy – which gives you the power to keep your business assets and right to remain in your power as head of the business, so you can repay your debts.
Lastly, if you’re worried about creditors chasing you, don’t worry: creditors can’t collect payments from you once you filed for bankruptcy.
So, there you go. You won’t lose everything; at least, not immediately. If you’re disciplined enough in handling your case, you can actually win while keeping your assets!
Myth #2: The debtor’s credit rating is ruined forever
This actually doesn’t make any sense. The truth is, your credit rating would be fall down once you fail to pay your credit obligations. Whether you file for bankruptcy or not, your credit rating will continue to fall down until you pay your obligations properly.
If you can’t truly handle your debts anymore, your best bet is to probably file for bankruptcy, settle your debts, then start over in building your credit again. This would be a better case than if you keep falling down due to unpaid obligations.
So, yes, your bankruptcy will hit your credit rating, but you can always rebuild afterwards. If you didn’t file for bankruptcy and you can’t pay your obligations, anyway, things will only be worse for you – and your credit rating.
Myth #3: Filing affects your spouse’s credit
This is not necessarily the case. In general, if you file alone, your spouse’s credit will not be affected.
If you filed with your spouse, however, then his/her credit will obviously be affected. It also depends on what case did you file: usually it’s a Chapter 7 vs. Chapter 13 Bankruptcy case.
If you want to learn how your bankruptcy would affect your spouse credit (if it would), consult with your best bankruptcy lawyer!
Myth #4: Filing destroys your financial future
Bankruptcy is financially rocky – very financially rocky, if you would – but it doesn’t doom anyone with financial future.
You can always recover from a bankruptcy, even if you had it twice, thrice or many more!
The deciding factor is just you: how disciplined you are (or lack of) in handling your money. No amount of bankruptcy will sink your financial future, but if you’re always careless with your money, then you’ll always fail.
In short, be disciplined with your finances!
Those are the 4 bankruptcy myths which you probably believed, and now must stop believing.
If you need any help about filing for a bankruptcy case, you can always consult of the best bankruptcy lawyer around!