If you have ever been unexpectedly let go from a job, watched your marriage dissolve or come into considerable debt due to an accident or another unforeseen circumstance, you may have considered filing for bankruptcy. All these situations may lead you to file for bankruptcy, but if you are like many people, you may not fully understand the steps involved in the process and how the filing may affect you moving forward. Below are some of the most commonly heard bankruptcy myths debunked. Now you can separate fact from fiction and get a clearer picture as to whether filing might be in your best interest.
Myth: You will lose all your worldly possessions
You may picture yourself filing for bankruptcy and then coming home to a locked door and your car getting towed up the road. In most cases, this is far from reality. If you are filing for a Chapter 7 bankruptcy, which is considered a “liquidation bankruptcy” and designed for those with little, if any, disposable income, you will likely not have to give up your most treasured possessions. Some may be considered “exemptions,” or things you genuinely need to go about your day-to-day life. Others, such as basic appliances or electronics, have little value to creditors and are therefore unlikely to be seized.
Myth: A bankruptcy filing is an indication of failure
Many people who file for bankruptcy feel as if they have failed in life. The reality is that there are countless factors that can lead someone to file, and many of those factors may be beyond your control. Medical debt is one of the most common reasons Americans file, and, often, that debt is accrued following an accident, unforeseen illness or another unanticipated expense.
Myth: Filing for bankruptcy absolves you of all debts
Many who file for bankruptcy mistakenly feel that doing so will absolve them of all debts. While doing so can often relieve you of medical bills and credit card and loan obligations, it does not cover everything. Student loans are typically not included in bankruptcy proceedings, and you will also still have to take care of any alimony or child support obligations you may have. You will also still be responsible for paying taxes after filing for bankruptcy.
Bankruptcy exists for a reason, and it is a tool that many people must rely on at one stage of life or another. If you feel that filing for bankruptcy may benefit you in the long run, consider getting in contact with an attorney.