Bankruptcy laws exist to provide a safety net for individuals facing overwhelming debt. The legal process is intended to offer a fresh start, allowing for the restructuring or discharge of debts to help you regain control of your finances.
However, bankruptcy is often shrouded in several myths and misconceptions that instill fear, shame and uncertainty. As a result, many individuals in financial distress shy away from exploring bankruptcy as a viable solution to their financial struggles.
Here are some widespread misconceptions about bankruptcy that you ought to know about if you are in financial distress and are considering bankruptcy.
Bankruptcy will wipe all debts
It’s true that bankruptcy can discharge many debts, which means you will not have to repay them. That said, you may still remain with certain financial obligations even after filing for bankruptcy. Some non-dischargeable debts include child support, alimony, taxes and student loans. The type of bankruptcy filed determines which debts are eligible for discharge.
You will lose everything
Bankruptcy is not designed to leave you destitute. It is why legal exemptions exist – to protect certain assets and possessions considered essential for individuals or families to maintain their livelihoods. For instance, your home, motor vehicle and personal property to a certain value may be exempt from the bankruptcy process in Texas.
Everyone will know you filed for bankruptcy
Filing for bankruptcy may be a matter of public record, but it is not published in newspapers or journals. In most cases, the only people who will know you filed for bankruptcy are your creditors and people you tell.
Bankruptcy ruins your credit score forever
Your credit score may take a hit when you file for bankruptcy. However, this is not permanent. You can rebuild your credit over time through responsible financial behavior and proper planning.
Filing for bankruptcy is a simple and quick fix
Contrary to popular belief, bankruptcy is not an easy way out or a swift solution to your money problems. It involves a legal process, paperwork and court proceedings, which requires careful consideration and often takes time to complete.
Understanding the reality behind these and other myths can empower you to make informed decisions if you are in a tight financial situation. Don’t let unfounded claims stop you from exploring bankruptcy if it could offer relief. Seeking legal guidance can offer some much-needed clarity, protect your interests and help you confidently navigate bankruptcy.
