We Accept ARAG & Hyatt Legal Plans
Free Consultation 770.766.5004
Begin Your Journey Towards Financial Freedom

4 Bankruptcy Myths and Why They're Wrong

Bankruptcy provides individuals facing insurmountable debt and financial uncertainty with the legal pathways they need to address their debt issues and pursue a brighter financial future. Because it is a legal process, however, bankruptcy can seem like a daunting, complex, and confusing endeavor. Unfortunately, this confusion and lack of familiarity with the process can lead to consumers getting their hands on the wrong types of information.

At The Bankruptcy Law Group LLC, our team has helped many men, women, and families throughout Georgia when they felt there was little hope in site. Often, we receive calls from clients and potential clients whose concerns and questions about bankruptcy are skewed by incorrect information they receive in the form of myths and misconceptions.

Backed by years of combined legal and financial experience, our team knows that having the correct information is vital to making informed decisions, which is why we always work closely with clients to directly address their concerns, questions, and any myths they may have been led to believe are true. Over the years, we have heard a number of myths about bankruptcy and its impact on consumers, including some of the most common:

If you file bankruptcy, you won’t be able to get credit.

This myth could not be further from the truth, and it can potentially scare consumers aware from pursuing debt relief options that will enable them to build better credit than they ever had. While it is true that filing for bankruptcy will have an impact on your credit, its effects are not ruinous nor permanent, and it will not bar you from obtaining credit in the future. For example, a Chapter 7 bankruptcy filing will remain on a credit report for 10 years, and Chapter 13 bankruptcy for 7 years. Even though a bankruptcy filing can be seen on a credit report, it does not mean that lenders and creditors will not be willing to extend credit. They often do!

By affording the opportunity to discharge unsecured debts, consumers find that they can better manage their finances, which in turn can allow them to actually improve, not hurt, their credit. Over time and with responsible financial behavior, including low-limit credit cards or manageable loans, individuals who file for bankruptcy often find that they are able to build a credit score higher than they had before filing.

Bankruptcy will make you lose everything.

This is a popular myth, and it may be rooted in cartoonish depictions of bankruptcy where characters are left with nothing but the shirts on their back. However, it is patently false. After all, bankruptcy was created to help honest but unfortunate debtors, not unfairly punish them and take everything they own. In fact, when you file bankruptcy, there are certain ways you can preserve and protect your property, either through no-asset cases, exemptions, or reorganization plans that allow you to make payments toward your debt and keep your property.

You won’t be able to buy a house after bankruptcy.

This is a myth that touches on the misconception that bankruptcy forever limits a person – something that is implicitly untrue. Bankruptcy was designed to help consumers, and to provide them with the unencumbered opportunity to be successful in their future. Individuals who file bankruptcy and establish credit soon discover that many banks and financial institutions are willing to work with them when they wish to purchase a home, especially if their credit report indicates a marked commitment to staying ahead in their finances since filing. Additionally, Fannie Mae and Freddie Mac policies allow them to buy your mortgage two years after a Chapter 7 bankruptcy or after one year of payments made under Chapter 13 (with an additional added year if you were in foreclosure when you filed).

Bankruptcy will eliminate all of your debts.

This is a dangerous myth that, if believed, could potentially harm consumers. This is especially so when a person believes that bankruptcy automatically wipes out all of their debts and chooses to increase spending and rack up more debt under the assumption that it will be wiped away. Not only will this not be the case, it can also subject a person to allegations of fraud. To put it simply, bankruptcy can help eliminate debts like credit card debt through a discharge, but not all debts are dischargeable. For example, secured debts like student loans (in most cases), spousal or child support, certain tax debts, and court fines and fees are not dischargeable.

Get the Information & Support You Need

Because believing myths can be detrimental to decision making and may actually create more difficulties for consumers, working with a knowledgeable attorney who takes the time to educate you about the process, your rights, and what to expect as you move forward in life is critical to future success. Having an experienced lawyer by your side can also ensure that the right steps are being taken, and that you pursue the debt relief option most appropriate to your unique situation.

At The Bankruptcy Law Group LLC, we have helped numerous clients navigate their legal journeys in pursuit of financial stability, and we are passionate about providing the personalized, experienced, and resourceful representation they need to swiftly and successfully find solid financial ground. If you have questions regarding your current financial situation, options for debt relief, and how our firm can help, we invite you to contact a College Park bankruptcy attorney from our firm for a FREE consultation.

Categories: