Debunking Four Myths of Bankruptcy
Filing a bankruptcy can feel like stepping into a big bad world of blame, lacks and desperation. True, a bankruptcy is a grave moment in our lives, true the pinch of not having enough money or no money is harsh, but it is not something we can go beyond. Life moves on even after a bankruptcy. In fact bankruptcy gives us a chance to start afresh.
Coming to why bankruptcy is viewed in such a negative way, it is because of the numerous myths and tales falsely perpetrated around bankruptcy.
While there are some people who fake bankruptcy to carry out fraudulent business or escape debts, you are not one of them. There is nothing wrong in filing a bankruptcy. But one should do so with adequate information. This post attempts to make some bankruptcy related information more clear to our readers and distinguish the truth from the tale.
Bankruptcy Wrecks Your Chances of Having a Positive Financial Standing
While we are not going to talk about where this commonly held belief originated from, the important part is that, the American citizens should know it is not true. Bankruptcy does not ruin your chances of buying a new car or house.
For those constantly defaulting on their debts and not having enough financial resources to pay off those debts and bills, their credit score will continuously show a downward curve. However, you can actually work towards and achieve a really good credit score in even a few months after bankruptcy. Like I mentioned earlier, bankruptcy is not the end but a fresh start. So do not believe the rumors floating around them. A bankruptcy in your record does not give you a bad credit score permanently, nor will it prevent you from getting a low rate on a car or house like anybody else.
Within a few years of bankruptcy itself you can recover your credit standing and you will be eligible for all benefits to acquire property like any other citizen. The ten year existence of bankruptcy in your credit report does not mar your chances of getting any financial benefits as long as your credit score is showing a gradual upward curve. And in most cases, people improve their credit score in just a few months after bankruptcy and in some cases bankruptcy actually makes your credit score better than what it was prior to it.
Bankruptcy May Make You Lose Your Job
This is another widely circulated and equally widely believed myth. This is false and dangerous as this might stop some very needy individuals from filing bankruptcy. You don't lose your job for filing bankruptcy. On the contrary Bankruptcy Law prohibits an employer from discriminating against you on account of your bankruptcy. Most of the times your employer is not even interested in your bankruptcy and never even finds out. But even if he or she runs a credit check on you for official purpose and finds out you have filed a bankruptcy, the chances are they are not going to hold it against you but instead feel relieved that you are freeing yourself of your financial worries and will now concentrate more on your work. Another thing you need to know is that our Bankruptcy law itself protects individuals from losing their jobs just for filing for bankruptcy. However, this does not mean that you cannot file a bankruptcy if you have lost your job and are in financial debt.
Bankruptcy Takes Away All Your Assets
No bankruptcy demands that you give up all your assets. In fact Chapter 13 and Chapter 7 bankruptcy will help you to come up with a debt repayment plan that actually helps you to make your payments and keep your assets. When you file for bankruptcy and have passed the means test, the judge invokes something called the automatic stay. This automatic stay freezes your assets for a few months or years depending on your individual circumstances. It discontinues all collection and foreclosure efforts and harassment techniques used by the banks and collection agencies. Besides that the bankruptcy exemptions stated in the Bankruptcy law further protects a lot of your assets. This is the time you need to work with an expert attorney to evolve a debt repayment plan that works efficiently to repay your creditors and also enables you to keep your assets and necessities.
You Do Not Need a Lawyer to File Bankruptcy
This is a myth from ancient times and probably held some truth in the pre-reform era. However, with the reforms in the Bankruptcy Law post 2005, the rules, the process and the conditions of filing bankruptcy have become a lot more stringent. The Bankruptcy Abuse Prevention and Consumer Protection Act makes it difficult for regular citizens to file bankruptcy. A lawyer expert in bankruptcies can be of immense help in filing the bankruptcy, determining a favorable outcome of the case and in developing a debt repayment plan that works efficiently to repay your creditors in time and in full and enable you to keep your assets.
So, to conclude these are the things you should keep note of while filing a bankruptcy. However, it is also essential that you know that there are certain debts that a bankruptcy cannot clear. These are child support, alimony, most student loans and fines owed to government agencies. So be alert, be aware and file for bankruptcy if you need it. You will emerge out of it less hassled, happier and well equipped to progress financially.