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What are the Most Common Myths About Filing for Bankruptcy?

What should I know about filing for bankruptcy?Bankruptcy has a bad reputation for the wrong reasons. It is also poorly understood by many in our society. Some of the myths about bankruptcy can make people less likely to file even when they would benefit. Common myths about bankruptcy include but are not limited to:

  1. It permanently ruins your finances. Bankruptcy attorneys are used to hearing this concern from potential clients. However, your credit scores are not permanent and can be improved in the years after you file. Bankruptcy filings do not stay on your credit reports forever. You can improve your credit scores by showing financial stability, such as paying your bills on time.
  2. Only deadbeats file for bankruptcy. The vast majority of the American population could be thrust into an impossible financial situation with no warning. Job loss, chronic illness and serious injuries could make it very difficult to meet your financial obligations. Even with the passage of the Affordable Care Act, people still file for bankruptcy over unaffordable medical bills. This is only one example of how a situation beyond your control could lead to bankruptcy.
  3. All types of debt are forgiven in bankruptcy. Unfortunately, it is difficult or impossible to discharge certain types of debt in bankruptcy. For instance, you must meet very specific criteria to receive an undue hardship discharge for student loans. We recently covered this in a blog. Past-due child support cannot be discharged in bankruptcy. Past due taxes might also be nondischargable.
  4. You will lose all of your assets. Bankruptcy can protect your important belongings. Exemptions could allow you to keep your assets. Most retirement plans are exempt from the bankruptcy estate. Our bankruptcy attorney could look at your situation in more detail to help you determine your eligibility for these exemptions.
  5. Creditors will continue to harass you after filing. An automatic stay is issued after you file for bankruptcy. Therefore, most creditors must cease collection attempts after you have filed. Creditors can even get in trouble for violating the stay.

Questions About Bankruptcy? Contact Our Lewisville Bankruptcy Attorney

Bankruptcy can be a confusing process without the help of an experienced attorney. You could have to meet certain requirements depending on which bankruptcy chapter you file under. Although you could file by yourself, it is not recommended. Lewisville bankruptcy attorney David Shuster could help you determine the most effective bankruptcy strategies for your situation.