No matter how bad one’s financial situation may be, some people seem to view filing for bankruptcy as the end of their life and a sign that they have somehow failed. While none of this is true, it doesn’t do away with the fact that bankruptcy-phobia is real and stops many people from being able to break free from debt and pursue financial freedom. These are the top 3 myths contributing to your bankruptcy-phobia:
1. You Are To Blame & Should Feel Guilt Over Financial Problems
Bankruptcy has gained a bad name as being something that people have to pursue after they have been reckless with their finances. But most bankruptcies are not filed by those who have done frivolous things to wrack up debt. While credit card companies may try to promote this idea, it’s simply not true and is used for the sole purpose of guilt-tripping people to keep them trapped under debt.
Bankruptcies usually happen because of tragedies outside of a filer’s control, such as the loss of a job, a breakup or divorce, medical issues, or an economic downturn due to the pandemic. No one should feel guilty about pursuing a bankruptcy -and it is not a sign of failure, instead, it’s proof that you are taking responsibility for your finances and doing the best thing you can do to redeem a bad financial situation. You are choosing to reclaim your future by choosing bankruptcy.
2. Filing For Bankruptcy Means That You Will Lose Everything
When people picture bankruptcy, they often envision having to give up their house, car, and personal possessions. Ultimately, they picture having to live without anything and starting all over. Thankfully, bankruptcy laws work to try to protect certain assets to ensure people can retain their important possessions while making their debt load more manageable.
Often, houses, personal possessions, vehicles, cash, government benefits, and retirement accounts are protected to some degree. While you may lose something in bankruptcy and you may have to do without a few luxuries for a while, you will still have enough to get a good start on your future. Filing for bankruptcy also offers an automatic stay on your home, meaning that you can’t be foreclosed on until the bankruptcy is settled. Rather than making people homeless, a bankruptcy is often what saves homes!
3. Your Credit Score Will Go Back To Zero After Bankruptcy
When someone is deciding to file for bankruptcy, one of the biggest concerns filers face is that their credit score will be completely demolished and almost impossible to ever revive. In reality, bankruptcies don’t destroy good credit — they just make bad scores a little worse. Which is something that will happen anyway the longer someone puts off addressing creditors and letting bills go unpaid.
Being behind on your payments hurts your credit score. It will have already played the biggest role in lowering your credit score. Ultimately, bankruptcy will look better than simply letting bills go on being unpaid and ignoring your financial situation. And once you have filed for bankruptcy and either completely got rid of your debt (through Chapter 7) or created a manageable payment plan (through Chapter 13), you can work to start the rebuilding process.
On average filers are able to rebuild their credit score in as short of a time period as 18 months! But this time, they can confidently keep building their score up even higher instead of just trying to prevent it from falling further through unmanageable debt.
Thinking About Filing Bankruptcy?
There is no reason to be embarrassed about taking responsibility for your finances and doing away with debt through the legal process. Bankruptcy is life-altering, but in the most positive way — it works to give people a fresh start with a brighter financial future.
If you have been trapped under debt but unsure about filing for bankruptcy due to the three myths listed above, it’s time to throw off the shackles of fear and pursue the financial freedom you deserve! Contact our offices to learn more about bankruptcy and how it can help you.