Many people have understandable fears about filing for bankruptcy. However, those fears are often based on misinformation.
These are five of the most common myths about bankruptcy.
1. You will not be able to get credit
Your credit score may take a significant hit when you file for bankruptcy. However, you can immediately begin rebuilding your credit by making on-time payments and only borrowing what you can afford to repay. You may pay higher interest rates, but many lenders will still work with you.
2. Filing for bankruptcy is stealing
Some unscrupulous debt collectors may tell people that filing for bankruptcy is stealing or even a crime of some sort. This is not true. Chapter 7 and Chapter 13 provisions exist to provide people who are struggling with debt with a legal option to financially recover.
3. Filing for bankruptcy is difficult
Most personal bankruptcies are straightforward affairs. If you need help, an experienced bankruptcy advocate can walk you through the process.
4. You can not file more than once
If you have filed for bankruptcy in the past, you may think you can not file again. However, you can discharge your debts once every eight years through Chapter 7 and once every two years through Chapter 13.
5. Most people do not qualify
Congress added a means test to the bankruptcy law in 2005. Many people still qualify for Chapter 7 under this test, and those who do not can usually file for Chapter 13.
Filing for bankruptcy can seem like a scary step to take. Separating the facts from the myths can help you make your decision with confidence.