Most people have preconceived notions about bankruptcy, and the common bankruptcy stereotype doesn’t usually make us sympathetic to people facing bankruptcy. Filing for personal bankruptcy does not always mean that someone cannot resist the temptation of credit cards. Many people will file for bankruptcy for other reasons.
- 1.- People Who File for Bankruptcy Are Financially Irresponsible
Many factors can lead someone to file for bankruptcy. Job loss, divorce, or the high cost of medical care have all driven well-intentioned Americans into bankruptcy. The financial fallout from the coronavirus pandemic has begun to trigger a wave of business and household bankruptcies.
- 2. Bankruptcy Discharges All Past Debts
Many people file for bankruptcy, hoping for a fresh start. But several types of debts are not discharged by bankruptcy. Student loan debts typically can’t be discharged in bankruptcy, unless you can prove a hardship. Tax debts are sometimes reduced or discharged, depending on the circumstances, such as the age of the debt.
- 3. If You Spend Recklessly Before Bankruptcy, You Won’t Have to Pay Back That Money
You could end up in trouble if you do this. Maxing out your credit cards in the hopes that your balances will be forgiven through bankruptcy is called presumptive fraud. Avoid spending too much on luxury goods or services within 90 days of filing for bankruptcy or taking a cash advance on your credit card.
- 4. Bankruptcy Ruins Your Credit Forever
Bankruptcy can stay on your credit report for up to 10 years from your filing date, but its effect on your credit score diminishes over time before it drops off your report. Once you file for bankruptcy, you will be surprised by how soon your credit score can improve afterward.
After your debts are discharged, check your credit report for accuracy if you want to make sure the discharged debts are marked appropriately.
- 5. Bankruptcy Is a Cure-All
If you file for Chapter 7 bankruptcy, it explains that your debt will be wiped out. But if you file for Chapter 13 bankruptcy, you will pay back a portion, if not all, of your debts over three to five years. Filing for bankruptcy is not cheap. You can expect to pay in court and pay attorney fees also. You will also be required to complete credit counselling before you can file for bankruptcy.
Bankruptcy can seem like a scary process, especially with all this misinformation going around. An experienced bankruptcy and debt relief attorney can help you explore your options and determine the best course of action for you, your family, and/or your business. If you want to know more about this, schedule your Initial Consultation or call us.