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Bankruptcy is a legal process that could be used by individuals, corporations, and other entities that cannot repay their debts. It is often considered a last resort for those who are struggling financially. However, many people have misconceptions about bankruptcy that prevent them from seeking help when needed. In this post, Berleth & Associates owner Robert Berleth will discuss ten common bankruptcy misconceptions to debunk.
Many people believe filing for bankruptcy is a sign of financial failure and will ruin their credit score. However, bankruptcy can be a proactive way to resolve debt problems and get a fresh start. It can also improve your credit score in the long run by eliminating debt and preventing further delinquencies.
Another common misconception is that bankruptcy will force you to surrender all your assets, including your home, car, and personal belongings. However, bankruptcy law allows you to keep certain essential assets, such as your home, vehicle, and personal items, while discharging unsecured debts.
Many people believe that bankruptcy is only an option for individuals with low incomes or no assets. However, regardless of their financial situation, bankruptcy is available to anyone who meets the legal requirements. Additionally, bankruptcy can help protect assets and income for those struggling financially.
While filing for bankruptcy will initially harm your credit score, it’s only temporary. Proper credit management can rebuild your credit to a higher level than before. Delaying bankruptcy only delays the chance to rebuild your credit since payment delinquencies and collection actions damage your credit score every month.
You can also improve your credit score during and after bankruptcy by making timely payments on any remaining debts, checking your credit report for errors, and using credit responsibly.
Another common myth is that filing for bankruptcy is immoral and only irresponsible people should file. This idea is a misconception. Bankruptcy is a legal remedy provided in the law; no moral judgment is designed to accompany it.
There is no limit to how many times you can file for bankruptcy. However, there are time limits on how often you can file, how much debt you can discharge, and under which type of bankruptcy you file.
For example, you can file for Chapter 7 bankruptcy once every eight years and Chapter 13 bankruptcy once every two years. It is essential to consult with a bankruptcy attorney to determine your eligibility and the best course of action for your specific circumstances.
Bankruptcy proceedings for a business entity are completely separate from your personal credit. While it may affect the owner’s credit if they have personally guaranteed the business debt, their personal bankruptcy is not directly tied to the business’s financial situation.
On the other hand, if a business owner files for personal bankruptcy, it can impact their ownership and control of the business. This is why working with experienced bankruptcy attorneys like Berleth & Associates is crucial, who can guide you through the process and protect your interests.
Many people assume that bankruptcy is a “get out of jail free” card, which doesn’t require any effort. However, bankruptcy requires comprehensive financial documentation and several detailed forms to be completed accurately.
Additionally, not all debts can be discharged in bankruptcy, which can take several months to complete. Therefore, it is not an easy way out but rather a legal tool for those struggling financially.
While declaring bankruptcy will eliminate many kinds of debt, certain debts, such as tax debt, student loans, and child support, are not eligible for discharge. It depends on the type of bankruptcy you file and which debts are dis- or non-dis-chargeable via bankruptcy.
Many people assume they cannot afford to hire a bankruptcy attorney, especially if they are already facing financial difficulties. However, bankruptcy filings prepared by an attorney are more successful than those filed without an attorney’s help, which could lead to a better financial situation. Most bankruptcy attorneys offer payment plans and installment options to make hiring an attorney more feasible for their clients.
In addition to debunking these misconceptions, every individual’s financial situation is unique, and a qualified bankruptcy attorney can provide personalized guidance and support throughout the process. Don’t let these common misconceptions hold you back from considering bankruptcy as a way to improve your financial future.
So, if you are struggling with debt, don’t hesitate to contact a bankruptcy attorney and explore your options. Remember, there is no shame in seeking help to improve your financial situation. Bankruptcy can be a valuable tool for individuals and businesses alike, and it’s essential to have accurate information before making any financial decisions.
In conclusion, seeking bankruptcy protection and guidance is an intimidating process. Having the right knowledge to make informed decisions at every step is important. Being fully aware of the common myths and misconceptions about bankruptcy can help you understand whether bankruptcy is right for you and how it can bring a fresh start to your life. At Berleth & Associates, our bankruptcy lawyers provide an empathetic, detailed consultation process to answer any questions and ensure that clients are fully informed about their legal options and bankruptcy proceedings. Contact us today to request an appointment.