There is a lot of misinformation surrounding bankruptcy. You may be reluctant to seek this form of debt relief based on things you have seen or heard. However, filing for bankruptcy may be the best way to help you get on the path to a brighter financial future. You shouldn't allow myths to get in the way of seeking protection from your overwhelming debt.
Myth 1: Bankruptcy is only for people who can't control their spending
While poor financial management can cause many people to go into debt, unexpected expenses can put anyone into a financial hole. One study found that two-thirds of households lack the savings to weather a financial rough patch.
The loss of a job, a cut in pay or a medical emergency can leave most households struggling to keep up with expenses. Debt does not only happen to people who live beyond their means.
Myth 2: Filing for bankruptcy means you will lose everything
Filing for bankruptcy will not result in you losing all your possessions. However, some forms of bankruptcy may enable you to hold onto more assets than other types of bankruptcy.
A Chapter 13 bankruptcy, for example, allows you to reorganize much of your debt, enabling you to make affordable payments over a set period. This option can even put a stop to foreclosure proceedings, providing you with the time you need to catch up on mortgage payments or to request a modification to the terms of your loan.
Myth 3: Bankruptcy will permanently destroy your credit score
There is no way around it. Filing for bankruptcy protection will hurt your credit score. However, if you are unable to keep up on your current payments, your score is already taking a hit. In many ways, bankruptcy allows you to start over.
It will take time, but once your outstanding debts have been discharged, you can begin rebuilding your credit. You can start with a debit card tied to your bank account. This will prevent you from spending money you don't have. Then you can apply for a credit card. Make timely payments, pay in full, and you will be surprised how fast you can rebuild your credit score.
Relief may be just around the corner
When you are struggling with debt, the stress can be overwhelming. The good news is options are available. You should seek advice from a professional to learn more about bankruptcy and other forms of debt relief.
