Debunking Some Of The Myths Associated With Bankruptcy

We find people struggling with financial difficulties. They are liable to pay the debts to the creditors but they cannot do so, therefore they decide to file a bankruptcy. Before filing for bankruptcy, it is better to evaluate other alternatives available. After trying other options, if you do not get any solution then only decide to file a bankruptcy.

There are various options available for the settlement of the creditors’ claims. Taking advice from an expert is always recommended. To determine which option is right for you, it is wise to consult attorneys like San Diego bankruptcy attorneys, whose consultation could guide you to choose the most realistic option in accordance to your situation.

Bankruptcy is the inability to discharge your financial obligations. Many individual and companies are filing for bankruptcy due to the current economic crisis or personal losses. Whatever be the reason, bankruptcy is still considered humiliating and proof of your failure. However, it is not completely true. In many cases, bankruptcy could be the only solution to save yourself.

In such case, you should be acquainted with all the myths associated with bankruptcy. The common myths to look out for are:

Bankruptcy sets free all past debts

Filing for bankruptcy does not discharge all your past debts, especially if the past debts are domestic support obligations such as alimony or child support, government- issued student loans and legal settlements. These debts have to be paid no matter what.

Bankruptcy permanently ruins your credit

It is true that the filing of bankruptcy will stay on your credit report for ten years. However, in practice, it is seen that within one year of filing people are able to access credit cards. It is recommended that people coming out of bankruptcy should gradually rebuild their credit by getting a secured card and wisely managing it.

Filing for bankruptcy means losing everything you own

This is the most common myth. When you file for bankruptcy, you do not have to turn over all your property to the bankruptcy estate. All state protects certain assets, such as your house, car, retirement plan, household goods and clothing.

Filing bankruptcy is just filling out some forms

Believing in this myth could be your biggest mistake. Bankruptcy procedure is a grueling process and the road to debt relief will not be an easy one. It is not simply filling out some forms and submitting it. It is a serious business where the forms you submit to federal courts have many legal implications.

All bankruptcy options are essentially the same

People often make a mistake in believing that all the bankruptcy options are eventually the same. But it is not true. People can file for bankruptcy under different chapters. For example, Chapter 7 is quicker, cheaper and has higher success rate. Chapter 13 takes a longer time to use their disposable income to repay the debts and Chapter 11 bankruptcy involves financial reorganization of a business.

Only ‘losers’ file for bankruptcy

It is a common misconception that all those who file for bankruptcy are money-wise careless. Most people are victims of some serious problems like legal fees and cost associated with divorce, medical treatments, and long-term unemployment, which have forced people to deplete their savings and rely on credit cards and loans. They are forced to be in this situation not because of their risky and reckless financial decisions but more because of their situation.

Thus, it is wise to counter all the myths associated with bankruptcy and have a clear understanding of all the processes, before filing for bankruptcy. So, taking help from an attorney is always suggested.