Clark & Washington

Common Myths and Misconceptions About Bankruptcy

When finances are out of control and unpaid bills become overwhelming, people may consider filing for bankruptcy. The truth about bankruptcy is that it can provide debt relief in many situations and help people to get their lives back on track. A qualified bankruptcy attorney will guide clients through the process of filing the necessary paperwork and attending court hearings. Unfortunately, there are some misconceptions about bankruptcy that can prevent individuals from getting the help they need. Let’s clear up a few of these issues.

Misconceptions About Bankruptcy

Bankruptcy Wipes Out All Debts

Bankruptcy can eliminate credit card debt, unpaid medical bills, unpaid rent or utility bills, some auto accident bills, and other unsecured loans. Other debts will not be eliminated through bankruptcy. These include student loans, child support, alimony, federal income tax debt, some state taxes, and condominium or HOA fees.

You Will Lose Your Home

In most cases, people will not lose their home because of a bankruptcy. As long as the mortgage payments continue to be made in a timely manner, your personal residence will not be sold to pay off the debt. In addition, most retirement funds are also protected in bankruptcy.

Bankruptcy Will Ruin Your Credit

Bankruptcy will affect your credit score and appear on a credit report for six years. A bankruptcy will make it harder to borrow money, but not impossible. Many individuals coming out of bankruptcy are able to obtain a secured credit card with a low limit. Making on-time payments will help them rebuild their credit. Bankruptcy mandated credit counseling and debtor education will help individuals develop a personal budget plan. Paying all bills on time and handling finances responsibly will help individuals repair their credit scores.

Everyone Will Know You Filed for Bankruptcy

Although bankruptcy filings are public record, it is not likely that friends, neighbors, or your employer will know about it. Typically, the only ones to know about a bankruptcy are the creditors.

Determining whether bankruptcy is right for you is not an easy decision, but one best made with a legal aid. It is imperative to consult with a bankruptcy attorney to determine solutions best suited to your unique needs and situation. If you have other bankruptcy questions, contact our attorneys.

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