Bankruptcy law is a complicated subject that deals with personal finances and people’s abilities to repay debts. As such, it engenders a lot of discussion, much of which is inaccurate. Here’s the truth behind some of the most common myths about filing bankruptcy.

3 Key Misconceptions about Bankruptcy

1. All of Your Debts Are Discharged

Although bankruptcy does provide a significant amount of debt relief, some of your debts will not be discharged. Certain debts that you are personally responsible for will not be forgiven. For instance, you cannot escape back child support or spousal support. Tax debts are also not discharged through bankruptcy, nor are debts you have incurred through fraud. Lastly, student loan debts will remain with you after bankruptcy proceedings unless you can prove the debt will cause you undue hardship.

2. It Will Destroy Your Credit

Many people fear they will bear a financial "scarlet letter" for the rest of their life if they file for bankruptcy. You will have to deal with stricter credit policies temporarily, but these changes aren’t permanent. Most lenders only look back 7 to 10 years, so your history can become clear again within the decade. Moreover, you will likely receive offers of secured credit shortly after your filing. Such charge cards require you to deposit collateral funds and offer a low limit, but you will be able to start repairing your credit history quickly.

3. You’ll Have to Liquidate Everything

A third misconception is that bankruptcy leaves you with nothing to your name. In truth, under Chapter 7, many of your belongings, including your primary vehicle and primary residence, are often exempt from liquidation. Moreover, under Chapter 11 bankruptcy, you usually do not need to liquidate anything. If you have a steady income, you can restructure your debt payments into an amount you can afford.

If you need a seasoned attorney experienced in bankruptcy law, contact Gilbert P. Kaback, Attorney at Law in Colchester, CT. Mr. Kaback has been practicing law in New London County for more than 20 years and is a fierce advocate for his clients. In addition to bankruptcy, he and his team specialize in probate, real estate, litigation, DUI defense, and criminal defense. To arrange a consultation, call (860) 537-0874 or visit their website to learn more about bankruptcy law.