Bankruptcy is a loaded term. It may invoke feelings of fear or confusion. This is especially true because there are so many widely-held misconceptions about bankruptcy. Many of the things you hear about bankruptcy from others are simply not true.
How can you know what beliefs about bankruptcy are right or wrong? Here are some of the most common misconceptions about bankruptcy so you can know the truth.
Misconception 1: You will lose everything
Filing for bankruptcy sounds like a scary process. Some people may tell you it will cause you to give up your car, house or other possessions. However, you can keep most–if not all–your possessions when declaring bankruptcy. A Chapter 7 case may require you to give up some assets, but certainly not everything. Under Chapter 13, you get to keep all your assets.
Misconception 2: Bankruptcy ruins your finances
Chances are that if you file for bankruptcy, you are already dealing with financial turmoil. Bankruptcy is a way for you to relieve yourself of your debts and rebuild your finances. While it is true that bankruptcy impacts your credit, it, by no means, ruins your future. In fact, it gives you a clean slate; you can end up more financially successful than before.
Misconception 3: It is an easy process
While there are benefits to filing for bankruptcy for certain people, that does not mean it is simple. Bankruptcy is a complex legal process that requires accuracy and diligence. The consequences of doing it wrong can be disastrous. If you are dishonest in your documents or make mistakes, you may even face criminal charges for bankruptcy fraud. Do not make the decision to file bankruptcy lightly. If you do choose to file, follow every step carefully.
It is best to make a decision about bankruptcy when you have a clear understanding of what the process entails. Without these misconceptions in your head, you can be more confident about making the right choice.