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If you find yourself in a situation where you can’t repay debts to creditors, you may be able to file for bankruptcy. Many people believe that this represents a “failure” that they can never recover from. In fact, it’s a smart way to hit the reset button and get on track to a brighter future. Here are more pervasive myths explained.

5 Misconceptions About Bankruptcy

1. It Eliminates All Your Debts

Bankruptcy isn’t a cure-all for every debt you’ve ever accumulated. Certain types of debt, such as student loans or alimony payments, are not covered. You will still need to pay these.

2. Your Credit Score Will Be Permanently Ruined

Some people hesitate to file for bankruptcy because they think it will ruin their credit. While it’s true that your rating will be temporarily affected, you can rebuild it. Get a secure, low-limit credit card and make regular, timely payments to get your score back up.

3. All Your Assets Will Be Lost

bankruptcyAnother myth that prevents people from filing for bankruptcy is the thought that all their possessions, from their car to their pension, will be seized. In fact, most individuals file “no asset” cases. This allows the debtor to keep all their belongings. 

4. It’s an Excuse for a Spending Spree

When filing for bankruptcy, some people are tempted to invest in last-minute “business expenses,” like a new computer or car, in hopes they won’t have to pay for them. In fact, the courts will review every penny, and last-minute spending sprees are usually considered fraudulent.

5. Bankruptcy Means You Failed

Most bankruptcy cases are due to unavoidable causes, from job loss to illness or divorce — factors you can’t control. Whatever your circumstances, filing is not a personal failure or character flaw. It’s a financial remedy that was developed for a reason — to help people before they are in real crisis.

 

Have more questions about bankruptcy? Ask Arndt Buswell & Thorn S.C. in Sparta, WI. With over 25 years of experience, these lawyers are known for the attentive care they give each case, allowing them to form lifelong relationships with their clients. Whether you need a divorce attorney or advice regarding local real estate law, they can help. Find out more about their practice areas online. For a consultation, call (608) 269-1200 today.

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