Everyone’s heard of bankruptcy, but you’d be surprised how few people really know about it. As Philadelphia bankruptcy attorneys we hear misconceptions about bankruptcy every day.
These myths keep good people from seeking the legal relief they need. That’s why we wanted to take the time to get them all cleared up.
Myth #1: Bankruptcy means running out of cash.
Many people believe you are bankrupt the moment all your bank accounts have zero balances, with no way to replenish that income.
While that would certainly be a dire situation, it’s not bankruptcy. In fact, in some cases, bankruptcy can keep all your bank accounts from having zero balances. Bankruptcy is a legal process that helps you either reorganize or discharge your debt.
And you should definitely file well before you run out of money entirely.
See also: Do You Have to Be Behind on Your Bills to File for Bankruptcy?
Myth #2: Bankruptcy means you’ll never get a car loan, home loan, or credit card again.
This is probably the biggest reason why people wait too long. We happen to live in a society where it’s very difficult to get by without using some forms of credit, especially to get a car loan.
Fortunately, you’ll be surprised to learn you’ll start getting car loan and credit card offers immediately after your bankruptcy is discharged. Buying a home may take a little longer (typically two years), but there are quite a few bankruptcy-friendly home lenders who won’t hold your use of this perfectly legal remedy against you.
Myth #3: Bankruptcy destroys your credit.
While it’s true the record of your bankruptcy stays on your credit for many years (ten for a Chapter 7, seven for a Chapter 13) it doesn’t necessarily hurt your credit.
In fact, many people find their credit score rising directly after bankruptcy. You’re not going to waltz out of bankruptcy with a 750 credit score, but eliminating all those collection items and past due accounts tends to have an immediate and significant increase on your score.
Remaining conscious of your score after the bankruptcy could make it possible to achieve a very high credit score even before these records disappear from your report.
Myth #4: Bankruptcy is really hard and scary.
Bankruptcy can certainly be a hard thing to do if you try to do it by yourself. In fact, it’s virtually impossible to discharge a Chapter 13 case without the help of a qualified attorney.
With a qualified attorney’s help, and a little bit of advance preparation to make sure you have all the documents you need on hand, bankruptcy can be pretty easy. Maybe even boring.
You’ll fill out some forms, attend some routine meetings, you’ll take a credit counseling class. If you’re honest, truthful, eligible for the form of bankruptcy you’re trying to file and informed about what your discharge is likely to look like then bankruptcy has a good chance of being one of the most drama-free legal cases you’ll ever be involved in.
See also: Is Bankruptcy Always Emotionally Devastating?
Myth #5: Bankruptcy represents some form of moral weakness.
The pervasive myth about bankruptcy is the big spender who foolishly runs up his or her Master Card buying fun things until his or her financial house of cards simply falls apart.
In fact, emergency car repairs and medical debt drive bankruptcies more often than not. People use credit cards to make ends meet after a major job loss or layoff. Some people’s wages don’t really offer a way to save a lot of money, or any money, after all basic needs are paid for.
Even if you were reckless, it’s perhaps time to be a little bit forgiving of yourself. Most Americans struggle with financial literacy. Use the legal remedy to pick up the pieces and change how you approach money.
Keep in mind that there’s not a corporation in this country that wouldn’t file bankruptcy to save itself if they felt it was the strategic business move. If corporations get an out without anybody judging them, shouldn’t the average family?
See also: It’s Time to End the Stigma of Bankruptcy. Here’s Why.
It’s time to stop waiting so you can stop worrying.
Waiting too long to file can make your situation a lot worse.
If you’re not sure whether bankruptcy is the right move for you, call us. We’re here to give you an honest assessment of your situation and to guide you through the process of making the right choice.
We’re available 24/7, and your initial consultation is free.