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Dispelling 3 common bankruptcy myths

On Behalf of | Nov 14, 2022 | Bankruptcy

Bankruptcy bears a long legacy of association with poor money management and other unpleasant stereotypes. Many individuals see it as shameful, something to hide.

However, it is nothing but a tool provided by the government to aid individuals in reducing their debt and essentially gaining a fresh start in life. Part of the reason this negativity continues to surround bankruptcy is the fact that numerous falsehoods persist about it.

1. The filer’s credit never recovers

Bankruptcy affects the filer’s credit score, but not necessarily in a permanent manner. It remains on his or her record for seven or 10 years, not forever. It also does not remain stagnant. The filer may improve it over this period through actions, such as paying bills on time and obtaining a secured credit card.

2. Bankruptcy removes all kinds of debt

Chapter 13 bankruptcy involves a repayment plan that usually includes many unsecured debts. Chapter 7 bankruptcy discharges unsecured debts, including medical debt, credit card bills and unpaid utility costs. However, neither wipe out student loans or back child support.

3. Filers lose everything

Filing for bankruptcy does not mean a person loses everything (house, car, furniture, etc.), but it does not mean he or she loses nothing. What happens to personal property depends on the kind of bankruptcy and the kind of debt.

Bankruptcy is far from a shameful subject. Many individuals find themselves facing it due to circumstances outside of their control, like an injury or a sickness. By filing for bankruptcy, people take charge of their debt and their life and gain a new lease on it.