Five Myths About Filing Bankruptcy
A bankruptcy declaration is often viewed as a last lifeline for debtors caught in a riptide of late fees, high interest rates, and overdue accounts. Despite the attached stigma, going bankrupt isn’t as financially destructive as common thought would invoke. These five myths frequently fuel the negative connotation attached to seeking legal refuge from creditors.
Myth #1: Bankruptcy Is Forever
Law journals and newspapers commonly publicize personal Chapter 7 and Chapter 13 declarations. The permanency of their name in print deters many people from seeking legal protection. Another concern is that a filing will carry the same weight as a felony conviction when applying for employment, housing, or credit decades later. The truth is that going through bankruptcy will follow you for seven years, and doesn’t impact application status as much as you would think.
Myth #2: My Credit Score Will Never Recover
Forever is a long time, and it’s certainly much longer than seven years. Providing you keep your credit balances current after your court date, it’ll be much sooner than seven years before lenders begin opening up to you. This will also boost your credit rating. It’s not uncommon for people to have FICO scores in the 650-750 range in as little as three years after filing.
Myth #3: All People Who Go Bankrupt Are Financially Irresponsible
Financial distress is caused by a myriad of factors. Medical bills are one of the biggest causes of new bankruptcy cases. A person who has paid their bills on time for decades may wind up owing tens of thousands following a health emergency. Job loss, a spouse with a spending problem, divorce, or natural disaster can also contribute to an unforeseen fiscal crisis.
Myth #4: Bankruptcy Can Directly Result in Eviction or Foreclosure
Fear of losing shelter holds many people back from contacting a bankruptcy attorney. Providing a tenant has kept their rent or mortgage payments current, a landlord or lender has no basis to rescind residency simply due to seeking legal protection from other creditors.
Myth #5: Bankruptcy Should Be Your Last Option
Like no two people, no two debt situations are exactly the same. If you have multiple overdue balances, remember that creditors can seek legal action resulting in wage garnishments. Even making minimum payments on delinquent credit cards will not cover the snowball effect caused by default interest rates and late fees. Given this case, contacting a bankruptcy firm would be more feasible than a debt consolidation firm.
Some of the other alternatives for easing the burden of ballooning credit balances are loan consolidation, credit counseling, and debt settlement. By not writing bankruptcy off this list, you can avoid the added costs of time, money, stress, and the risk of legal judgments. With an open mind and careful consideration, you can maximize the benefits of the resolution you choose while decreasing your debt.