Many people are surprised to learn much of what they thought they knew about bankruptcy is actually untrue. Chances are unless you are struggling with debt or considering bankruptcy, you pay little attention to bankruptcy law. Unfortunately, this leads to a lot of misunderstanding about the process, and in situations when a person might be helped by filing he or she dismisses the opportunity because of misconceptions.
What are some of the most common bankruptcy myths that prevent people from filing?
It won’t stop creditors from harassing me! What’s the point of sacrificing my financial future if the misery will just continue?
One of the main reasons people file for bankruptcy is because it creates something called an automatic stay. This is another way of saying your debts are put on hold until the details of the bankruptcy are sorted out in court. The law prohibits creditors from taking any action that is considered an attempt to collect a debt, including foreclosing, repossessing, or calling, emailing, or mailing you in an attempt to get payment. Creditors must leave you alone once you begin the bankruptcy process or they will face punitive action.
Bankruptcy will destroy my personal relationships! I’m worried my spouse will turn against me.
Though bankruptcy and divorce do sometimes go hand-in-hand, there are usually other issues involved that lead to the break-up of a marriage. Filing for bankruptcy can ease a great deal of the stress experienced by couples suffering financial strain. It is important you and your spouse discuss your options and get all the facts before deciding together that bankruptcy is right for you.
All of my assets will be taken from me. I will have no home and be forced to use public transportation.
There are instances in which a bankruptcy trustee is authorized to seize assets in order to pay back creditors. However, it depends on the type of bankruptcy. If your goal is to keep your home or your vehicle, bankruptcy can actually increase the odds of this happening. Many foreclosures have been stopped because of bankruptcy.
If I file for bankruptcy now and years down the road my financial situation is much worse, I will have lost my chance to use bankruptcy to help me.
Ideally, filing for bankruptcy will help you clean up your financial situation and put you on a path to financial success in the future. However, there are no guarantees and life events can take a turn that lead to serious financial struggle, even for those who have diligently tried to keep things on track. If you should face financial hardship years down the road after a bankruptcy, you have the option of filing again. There are certain criteria you will need to meet, but more than one bankruptcy in a lifetime is possible.
My credit will be ruined forever if I file for bankruptcy.
This is perhaps the most common bankruptcy myth of all and it is absolutely untrue. Filing for bankruptcy is one of the best tools available to help you get back on track. It gives you the opportunity to begin rebuilding credit sooner than you would if you ignored your financial problems and did not file. In the future, creditors will view your bankruptcy as a sign of your taking action to fix a problem and will consider your current financial situation more than a bankruptcy in your past when determining if you are credit-worthy.