Filing for bankruptcy isn’t really something that people want to go through, and many people have developed a lot of incorrect or misguided knowledge from a variety of sources. These common myths and misconceptions may be so engrained that they’ve taken root in social common knowledge, often encouraging more people to not even consider this option that they could otherwise benefit from. Here are five of these myths we frequently hear and the actual honest answer about them to help clarify any doubts you might be having.
You’ll Lose Everything
Bankruptcy does not exist to punish those who have fallen into financial difficulty, in fact it’s exactly the opposite: it’s designed to help you. This means bankruptcy doesn’t actually force you to lose everything you have, and in fact, you may be able to keep some of your most important and valuable possessions, like your car, home, or even some of your other treasures. You should speak with an attorney about maximizing your asset exemptions when declaring bankruptcy, and you might be able to declare without actually losing anything at all!
All of Your Debts Will Be Discharged
Bankruptcy can help you alleviate many of your debts, but those which you can be held personally responsible for are not discharged by declaring bankruptcy. The most prominent type of debt that is not avoided through bankruptcy is student loans, which you will still be held accountable for even after filing. Tax debt, child support, and alimony responsibilities are also immune from bankruptcy discharge. Finally, any debts you have incurred from fraud convictions or victim restitution orders do not disappear simply because you file for bankruptcy, and they will stay with you until the debt is paid off.
Paying Off Your Debts Is a Better Option
If there’s one thing that’s well-known in society, it’s that bankruptcy is not a small matter and you should carefully consider your options before officially filing. In some cases, working to pay back your debt on your own may be a better option because your credit standing won’t have to suffer the blow of a bankruptcy declaration. However, simply trying to pay your way out of debt when you’re not making enough money to stay afloat isn’t going to progress you any closer to financial freedom. A good general rule of thumb to follow is if your debts are more than half of your annual income and you won’t be able to pay them off within five years, bankruptcy is likely your best option.
Bankruptcy Ruins Your Financial Standing
There is one thing that can be guaranteed about declaring bankruptcy: it will affect your credit score, and it will continue to do so for the next seven to ten years. However, the extent to which your score will be hit will vary greatly depending on your current standing and how you handle your financial affairs in the months and years following your declaration. Making payments to what debts you have left is a great way to start rebuilding your standing, and not long after you may find you can obtain secured credit cards again. While these low-limit cards do have some restrictions, they are an excellent tool for rebuilding your credit quickly. Some people even start to see their credit score surpass their pre-bankruptcy level within as little as two to three years of diligent and consistently good money and credit management.
Bankruptcy is the Result of Failure
Some people believe that declaring bankruptcy is admitting you have failed and are giving up, exposing a major character flaw. The vast majority of the time this isn’t even remotely close to the truth. In fact, back in 2009, more than half of all bankruptcies were due to a large and sudden accumulation of medical bills, and today’s outlook isn’t much better since deductibles have grown seven times faster than wages. All it takes is a sudden major illness or accident and someone could find themselves trapped financially.
The actual reality is that so many people could actually benefit from bankruptcy that refuse to consider it an option because their pride won’t let them seek help. If you’re in financial trouble, it’s a good idea to speak to a Myrtle Beach bankruptcy attorney. If bankruptcy isn’t the best option for you, they can direct you in the best way to go, whether through debt settlement, credit counseling, or any other solution.Want to know more about your options if you’re struggling under crippling debt? Call Lam Law Firm, LLC today at (843) 695-7700 to discuss your options with one of our attorneys and take the first step at regaining your financial freedom.