Unless you have been through a bankruptcy then you will probably not know a great deal about what actually happens when someone is going through the process. Movies and television have spread many myths and misconceptions about what actually happens during a bankruptcy. They make it out to be either the end of the world for someone or an easy solution to financial trouble.
Neither of these statements is accurate. Many people who declare bankruptcy are able to then with proper planning recover.
1. Bankruptcy is the easy option
This is probably one of the most damaging myths out there, many people believe the bankruptcy is an easy option and is a surefire way to quickly and easily remove all of your debt. The reality is far from this. Once an individual files for bankruptcy, there will be a record of this on their credit profile for 6 years. During this time, it will be very challenging to get any form of credit approved.
There is also the emotional toll as well. Filing for bankruptcy carries with it a stigma that can make a person feel shame for many years after the event. When in reality, filing for bankruptcy can be summed up as a prudent financial decision that benefits you greatly in the long run.
2. Anyone can do it
Bankruptcy is not something that should be taken lightly and while anyone can file for bankruptcy for many it won’t make sense to do so. There are costs and fees associated with any bankruptcy and for it to be the best option for you there are many determining factors to be considered.
3. It’s your only option
If you are struggling with debt or feel like there is no way out of your current financial situation then you should that bankruptcy is not the first option that you should consider. There are many debt management programs or ways that you can restructure your debt to help out with your financial woes.
Be warned, you need to thoroughly research any of the sources of debt management that you find as there are some companies that will prey on people when they are at their most vulnerable. Your best bet is to find a reputable company that has many good reviews online.
4. After a bankruptcy, it’s a clean slate
This is a very dangerous misconception about how bankruptcies work. There are debts that are not included in a bankruptcy. Debts that are secured like a mortgage or car loan will not be a part of the bankruptcy. If you are unsure of which of your debts are covered and which ones are not then you should speak with a bankruptcy expert so that they can walk you through your options in detail.
5. You will lose everything in the bankruptcy
The myth that you will be out on the street with nothing to show for all of your years of hard work after a bankruptcy is what makes the idea of filing so terrifying for many people. The reality is that you will not lose everything.
Based on your situation, you will probably be able to keep your home, a modest car and a lot of your other possessions. Big ticket items may have to go, but for the most part, you won’t lose everything that you own.
6. It’s only for poor people
Financial problems can hit anyone at any time in their lives. In fact, the more money people make, the more debt that they are usually in. So, it doesn’t matter what your net worth is, if you are insolvent, or struggling with a lot of debt, now may be the time to get in touch with an expert to examine your options.