Myth No. 1: All debts are discharged upon registering for bankruptcy
Certain debts, including child support, student loans, and the majority of taxes, cannot be discharged in bankruptcy, despite the fact that many debts can be discharged. However, the individual's most valuable assets, such as a home or automobile, are exempt from any bankruptcy proceeding.
Myth Number Two: Filing for bankruptcy will provide a consumer with a clean credit slate.
Depending on the form of bankruptcy that has been filed, all bankruptcies may remain on an individual's credit report for up to ten years. On the other hand, even after filing for bankruptcy, a person can take measures to improve their credit score. In addition, filing for bankruptcy will typically stop creditors from calling to demand payment.
Myth No. 3: In insolvency, you lose everything you own.
Again, this is not necessarily true, as exemption rules governed by state law enable a debtor to keep certain assets in many bankruptcy cases.
Myth No. 4: Both spouses must pursue bankruptcy at the same time.
You and your spouse need not declare bankruptcy at the same time if you are married. Therefore, either you or your spouse can apply for bankruptcy individually. Which option you choose largely depends on your financial situation at the time of bankruptcy filing and the jurisdiction in which you intend to file.
Myth No. 5: Declaring bankruptcy makes me a failure.
Certainly not the case. In fact, research indicates that the overwhelming majority of bankruptcies are the result of uncontrollable circumstances. These include health issues necessitating excessive medical bills, job loss resulting in a reduction in monthly income, and/or relief from a massive quantity of debt resulting from overextended credit. Numerous well-known figures, including Donald Trump, Walt Disney, Larry King, Abraham Lincoln, and even Henry Ford, have filed for bankruptcy in the past.
In the event that you may ever need to file for bankruptcy, knowledge is power. Clearly, understanding bankruptcy will protect you and your loved ones from its effects. If you are contemplating bankruptcy, please consult a qualified bankruptcy attorney in your area for additional information and specific legal advice pertaining to your financial situation.
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