When you need a new lease on your financial life, bankruptcy may be the answer. But there are a lot of strings attached to filing for bankruptcy in a way that helps your credit. Licensed tax attorneys who handle bankruptcy cases go through a lot of paperwork to ensure everything is done right. So, before you make the life-altering decision to file for bankruptcy, take the time to understand some of the myths surrounding it.
1. Dangers With Credit
Filing for bankruptcy does not permanently destroy your credit. The limited access to credit and loans for seven to ten years is about protecting the lender and the borrower. Not long after filing for bankruptcy, you will be eligible for several card offers that fall within your range. The most surprising part about credit is that even after filing, you can achieve an excellent credit score in a few months – it just takes dedication.
2. Filing While Married
A spouse’s college debt is not a shared debt. You will encounter a lot of situations where it is smarter to file for bankruptcy as an individual. If the debt is in your name, it is not mandatory that you file together as a married couple.
3. Negative Feelings Towards Bankruptcy
Yes, there is a social stigma attached to bankruptcies. But having a bankruptcy attached to your name does not prevent you from living a normal life. The highest office in the world has been held by powerful figures that have filed for multiple bankruptcies. Life is unpredictable, so getting financial help before you’re crushed is a smart personal move.
4. Bankruptcy Is A Get Out Of Jail Free Card
It’s probably a bad idea to go on a bankruptcy shopping spree after filing. Running up your credit cards before bankruptcy kicks in won’t make those debts magically disappear. By going on a spending marathon, you are creating a brand-new problem before your original one is even resolved.
5. Nothing Is Lost When Filing
You won’t lose everything, but filing for bankruptcy does not give you a ‘return to sender’ excuse. Some of your assets of lesser importance will be lost, liquidated, or unable to be protected during bankruptcy. A downgrade in lifestyle is expected, but not to the point where you will end up homeless. Most of the things that are lost are considered non-essential to a standard way of life.
6. Bankruptcy Is A One Time Deal
Chapter 7 bankruptcy can be filed every eight years, while Chapter 13 is limited to every two years. And with the historical slowness of getting the wheels turning for a Chapter 13 bankruptcy, it is possible to file for it immediately back to back. It’s not an ideal situation, but can be helpful when you find yourself in a similar financial rut a few years (or months) down the line.
Wrap Up
Don’t fall for the most common myths about bankruptcy. They only exist to slow down your progress in reducing overall debt. Once you’re over the initial hump, everything else will fall into place.
