5 Common Myths About Bankruptcy and the Truth About Debt Relief

 Posted on November 11, 2021 in Bankruptcy

While most people understand that bankruptcy is an option for eliminating debts, there are a lot of misconceptions about the bankruptcy process, the laws that apply to those who file for bankruptcy, and the ways filing for bankruptcy will affect a person’s life. By understanding exactly what the bankruptcy process entails, a person can determine whether it may be the best choice in their situation. Those who have outstanding debts that they are having trouble repaying can work with an attorney to determine their options for receiving relief.

Bankruptcy Myths and Misconceptions

Some of the most common bankruptcy-related misunderstandings include:

• Bankruptcy is only for people who are financially irresponsible - This myth is based on the misconception that people only have debts because of reckless spending or mismanagement of money. However, there are many cases where unexpected issues in a person’s life can put them in a difficult position. Medical debts are a common reason why people file for bankruptcy, and in many cases, there is no way to prepare for an unexpected health issue that may require expensive treatment. Layoffs and job losses can also make it difficult for a family to make ongoing payments on a mortgage or other loans, and bankruptcy may become necessary to ensure that they can regain financial stability. It is important to remember that a bankruptcy filing is not a reflection of a person’s moral character. In most cases, it is a measure that may be taken to address unexpected life changes and ensure that a family can meet its ongoing needs.

• Filing for bankruptcy will cause a person to lose all of their money and property - Depending on the type of bankruptcy that is filed, a person may or may not need to turn over some of their property. While a Chapter 7 bankruptcy may require some assets to be liquidated to repay creditors, many types of property are exempt from liquidation, and a person may even be able to complete a no-asset bankruptcy where they will not lose any property. In a Chapter 13 bankruptcy, a person will generally be able to keep their home and other assets, as long as they can complete a repayment plan and stay current on payments of secured debts.

• Bankruptcy will wipe out all of a person’s debts - While bankruptcy will allow a person to discharge unsecured debts such as credit cards, they may need to continue paying secured debts such as a home mortgage to avoid foreclosure or repossession of property. There are certain types of debts that bankruptcy cannot eliminate, including family support obligations and most student loans and tax debts.

• Married couples are required to file for bankruptcy together - If a couple has joint debts, such as a shared credit card account or home mortgage, they may need to file a joint bankruptcy petition. However, debts that were accrued by one spouse before getting married may be addressed through a sole bankruptcy filing.

• Bankruptcy will ruin a person’s credit and make it impossible to receive loans in the future - While bankruptcy will affect a person’s credit score, there are a variety of strategies a person can use to rebuild their credit. Some lenders may provide loans even after a person has filed for bankruptcy, and a person can increase their credit score by making sure they pay bills on time. This will ensure that they will be able to receive better loans or other forms of credit in the future. 

Contact Our Schertz Debt Relief Attorney

If you are considering filing for bankruptcy, the Law Offices of Chance M. McGhee can explain how this will affect you, and we will advise you on the best ways to make sure you can maintain financial stability in the future. To arrange a free consultation and get help with debt relief, contact our San Antonio bankruptcy lawyer today at 210-342-3400.

Sources:

https://creditcards.usnews.com/articles/bankruptcy-myths-debunked

https://www.abi.org/feed-item/the-top-9-bankruptcy-myths