Personal bankruptcy comes in two forms: Chapter 7 or Chapter 13. Under the first, you liquidate most of your assets to repay what you owe creditors. Under the second, the court helps people with a steady income restructure the debt amounts and payment schedules so they can repay the debt without having to sell assets. Although filing for bankruptcy has never been more common, there are still many misconceptions about the process. Below are some of these debunked myths. 

3 Myths About Filing for Bankruptcy

1. Bankruptcy Destroys Your Credit Rating Forever

It’s true that bankruptcy will be on your credit report for 7 to 10 years.  However, many credit agencies specialize in providing credit cards to clients that are considered riskier so they can rebuild their credit. You may also qualify for a secured card—one where you deposit funds as a security deposit in exchange for charge privileges—which lets you start rebuilding your credit immediately.

2. Both Spouses Must File

If your spouse has a lot of unpaid debt in their name alone, you don't have to assume responsibility for it by filing for bankruptcy with them. You might need to use your untarnished credit record going forward. However, if the debt is in both of your names, you should both file. Otherwise, the creditor can come after the other spouse even after the first spouse has discharged their debt through bankruptcy.

3. Bankruptcy Frees You of All Debt

A bankruptcy relieves you of much of your debt burden, but not all debts are discharged. For instance, you will still be responsible for past-due child support and alimony. You must still pay any unpaid taxes. In most cases, student loan debt is not discharged through bankruptcy. However, bankruptcy will free you of credit card debt and most other commercial obligations.

If you're considering filing for bankruptcy, contact the experts at We The People of NY for help with the process. They have served clients in and around Manhattan for more than 25 years. They also help with prenuptial agreements, living wills, or uncontested divorce documents.  Visit their website to message them with questions or call (212) 633-2200 to arrange a consultation.