When times get hard, you may face the decision of whether or not to file for bankruptcy.
While wrestling with that decision, remember that 399,269 people filed for bankruptcy in 2021, according to the United States Courts. Additionally, ensure that misconceptions do not affect your choice. Three common myths include:
1. It means I’m financially reckless
Bankruptcy can happen to anyone, regardless of how much money you make. While mismanaging debt and finances may play a factor, many bankruptcies happen due to other circumstances or a combination of different factors. Common scenarios include a recent divorce, ongoing health issues or unemployment.
2. I will lose everything
Filing for bankruptcy does not equate lose everything. Many of your assets will stay exempt or your debtors may have no interest in them, such as a TV. If you own property, the situation can get more complicated, but bankruptcy laws offer protection. In many cases, the equity you have in your home or a vehicle will remain yours if you continue to make payments. If you own them outright, they stay exempt.
3. I will have bad credit for 10 years
In all likelihood, your current credit already indicates that you have some financial issues. Thus, filing for bankruptcy has a minimal effect on poor credit. Although bankruptcy stays on your credit report for up to 10 years, depending on the type of bankruptcy, it does not automatically affect your score. After filing, you have a fresh opportunity to build your credit score back up.
If considering bankruptcy, it means you have found yourself in a stressful situation. Ensure that misconceptions do not hold you back from getting back on your feet.