Before approaching the appropriate financial authorities to file for bankruptcy, it may be prudent to familiarize yourself with some common misconceptions. You may discover that what you believed you knew about how filing for bankruptcy would affect your current situation is false.
The following are examples of common misconceptions about bankruptcy:
It is a common misconception that declaring bankruptcy eliminates eligibility for loans and other forms of credit in the future. Many believe that once they have declared bankruptcy, they will no longer be able to lend money. This is a misconception, as the reality is that you would still be able to obtain a loan, albeit with additional requirements.
In most cases, the factors would include a limited loan quantity or a shortened repayment period. Additionally, bankruptcy does not leave a permanent note on your credit report. It would be valid for up to ten years, allowing you to reapply for a loan afterward.
You must be completely broke in order to petition for bankruptcy: Many believe that filing for bankruptcy is only an option for those who are entirely destitute.
In reality, you can file for bankruptcy even if you still possess some assets or funds. New York, for instance, permits up to $2,500 in cash, funds in a qualified 401(k) plan, and even equity in vehicles.
Obviously, the laws vary from state to state, so you should research the bankruptcy requirements in the state in which you currently reside.
Now that you are aware of some of the myths surrounding bankruptcy, you should evaluate your options to determine whether it is genuinely appropriate for your current financial situation.
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