Understanding what bankruptcy entails is not the easiest thing in the world, but it’s even harder when there are no many misconceptions flying around about the entire process! Here are some of the biggest myths about filing for bankruptcy, along with a quick explanation of what the real deal is!
- Myth: If you’re filing for Chapter 7 bankruptcy, you’ll be able to wipe out all of your personal debts. Many people know that business bankruptcy cases typically require refinancing plans instead of debt erasure, but few people realize that personal bankruptcy cases often involve debt consolidation and refinancing as well. You might be able to get some of your debts cleared — something like credit card debt, for example — but domestic payments such as child support payments, along with student loan payments, can’t be cleared out.
- Myth 2: You’ll lose everything you have after filing bankruptcy. It’s true that you might have some possessions taken by the court to pay off your debts, but only if they’re worth a reasonable amount of money and only if they aren’t necessary for your daily life. If you have multiple cars, for example, you might be required to turn over all but one car; if you own any real estate property or any valuable items, you could be required to turn over everything that isn’t considered absolutely essential. A good legal representative will be able to advocate for you in court when these things are decided.
- Myth 3: Filing bankruptcy is the easiest way to start over fresh. For a lot of people, another option like debt consolidation might be a better choice. Bankruptcy is often seen as an immediate solution to financial problems, but the consequences of filing bankruptcy can stretch out for years. It’s important to talk with an experienced bankruptcy lawyer or legal team before making any concrete decisions, in order to determine if filing bankruptcy is the best choice for you.
Of course, this is just the beginning of some common myths about bankruptcy, so if you’re thinking about filing bankruptcy any time soon, it’s important to do plenty of research before anything else!