Avoiding Bankruptcy and Common Bankruptcy Myths

Although bankruptcy shouldn’t be desired as a way to get ‘out of debt,’ it is a truly helpful process for individuals who simply aren’t able to pay their debt and really need help.  It can allow individuals to pay off their debt in small amounts over the years, or be cleared of most debts in their name.  Bankruptcy is often surrounded by myths which some people believe to be true.  This article will clear up those myths and help individuals understand more about avoiding bankruptcy.

Avoiding Bankruptcy

Bankruptcy should only be the last option – when everything else has failed.  Before anyone files for bankruptcy, they should try other means to get out of debt and settle their debts.  This may include working out a payment deal with creditors and lenders, opting for debt consolidation or using other methods to get control of debt. 

Contrary to popular belief, creditors and lenders are usually more than willing to work with individuals because they are more likely to receive at least a percentage of the money they are owed.  These same creditors and lenders understand that when individuals file for bankruptcy, it can be very difficult to get a single penny back.

Bankruptcy Myths

 There are many myths surrounding bankruptcy which often make it seem like a wonderful option for anyone.  Below are the most common bankruptcy myths and important information which will clear up any misconceptions.

 

  1. Bankruptcy Gets Rid of ALL Debts – While this seems wonderful, the truth is that bankruptcy does not usually get rid of all debts.  Debts which are owed to the government or that have been court-ordered do not get cleared with bankruptcy.  This might include taxes which are owed, child support or alimony payments.

 

  1. Bankruptcy gives you A ‘Fresh Start’ – While in some ways, bankruptcy does help individuals start over, it is not a quick fix.  Bankruptcy can only be filed every seven years, and the mark which goes on your credit lasts ten years.  When a potential lender or creditor sees that an individual has filed for bankruptcy, he or she will be much more hesitant to open a line of credit for that individual.

 

  1. Bankruptcy is Free – Bankruptcy is most certainly not free.  In some cases, bankruptcy doesn’t actually get rid of debt, but allows the individual to pay off their debts over a longer period of time.  Also, most individuals must hire a bankruptcy attorney to be sure that they are going through the process correctly.  There are filing fees, attorney’s fees and more to deal with.

 

Although these myths are commonly believed, they are simply not true.  Any person considering filing for bankruptcy should extinguish all other options first.  They should also make it a point to understand the workings of bankruptcy and exactly what happens during the bankruptcy process.

 

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