One of the first things you need to know about bankruptcy is the fact that this is a financial mechanism used by so many people all over the world. In fact, even some of the world’s most successful and famous people like Abraham Lincoln or Walt Disney went bankrupt at one point. Titans of the industry like Henry Ford weren’t an exception to this rule either. Sure, the very word may have a negative connotation, however, once you start learning a bit about it, you’ll quickly realize that there are some myths and truths about bankruptcy that have eluded you for so long. Therefore, here are six myths and truths about bankruptcy that you need to know about.
Truth 1: Bankruptcy gets you rid of debt
Once you go bankrupt you’ll be forever free of some debts, which means that you’ll never, ever have to pay them off. Sure, it doesn’t get you rid of all your debts but those that it does handle, you’ll be forever free of. This means that you don’t have to worry about them ever again, regardless of your future success. Keep in mind, however, that there are some debts that are nondischargeable. This means that you’ll still have to pay them back. An example of one such debt is taxes, child support and alimony, student loans and fines or penalties owed to government agencies.
Truth 2: People won’t know that you’ve filed for bankruptcy
The next thing you need to keep in mind is the fact that once you file for bankruptcy, no one will know that you’ve done it. Sure, bankruptcy is a matter of public record, which, technically means that if someone was interested in whether you’ve gone bankrupt and decided to look for your record specifically, technically, they could find it. However, unless they know where to look (and that they should look, to begin with), they’ll be unable to find it. This is why bankruptcies of all the celebrities we’ve listed in the introduction are public knowledge. Not that it does them any harm, mind you.
Truth 3: It’s really easy to file for bankruptcy
One more thing that you absolutely need to keep in mind is the fact that filing for bankruptcy is incredibly easy. Especially if you go for professional bankruptcy advice. Keep in mind, nonetheless, that filing for different types of bankruptcy (for instance Chapter 7 or Chapter 13) may require slightly different procedures. Also, keep in mind that you might be in for some waiting game, seeing as how it may take three to four months to complete bankruptcy and obtain a discharge. The sooner you get over with this; the sooner you can start building up your credit.
Myth 1: You will lose everything you have
The idea that bankruptcy will result in a loss of everything you have is simply preposterous and it’s quite puzzling where this thought originated from, to begin with. In the majority of states, the law protects assets such as your home, your vehicles, your household goods, and your furniture. Other than this, you also get to keep your retirement plan and the cash value in your life insurance. Also, if you have any personal injury claims, you’ll still be entitled to them.
Myth 2: Your credit score is done for
The reason why this particular myth is so absurd is due to the fact that the reality is completely opposite. You see, what bankruptcy will do is get you rid of the debts that you can’t afford and leave you with all those that you can easily handle. This means that, if you play your cards right and truly give your best to become more responsible, your credit score will only go up from this point on. It is known that there are some people who managed to go for incredibly high credit score (over 720) after going bankrupt.
Myth 3: Your past will still be able to haunt you
One thing that the majority of people don’t seem to get is the fact that once you file for bankruptcy, all your creditors will be notified that they need to leave you alone. Failure to do so will result in a fine that they won’t be too happy about. This means that what you will get is, indeed, a fresh start.
Finally, we have to add an extra here and say that filing for bankruptcy doesn’t make you a bad person, a deadbeat or anything similar. A lot of honest, hard-working people end up in financial dire straits and when bankruptcy is the best solution, no one has the right to judge them for using it. Instead of lamenting over some ill-placed guild, start thinking of all the exciting new options that this will create and give it your best to plan out your future.