Common Misconceptions about Filing Bankruptcy

There are many misconceptions about filing bankruptcy, and they range from one end of the spectrum to another; some have the idea that it is a cure-all for financial woes and some believe that it is a personal failure that you will never fully bounce back from. Both extremes are incorrect. The disability attorneys at RGG Law want you to be informed when it comes to bankruptcy law and the way that filing for bankruptcy will affect your finances and your future.

You’ll Lose Everything

You may think that filing bankruptcy means that your house, car, and any items of worth will be taken away; the truth is, you’re likely to keep your possessions. The details depend on what type of bankruptcy you’re going for. Chapter 13 bankruptcy allows you to keep all of your possessions (Chapter 13 requires you to pay back your debt); when it comes to Chapter 7 bankruptcy (where you don’t repay your debt), the vast majority of cases are no-asset cases, which means you don’t have to give up possessions.

All Debt Will Be Wiped

Debts have different classifications. Owed money like credit card debt, medical bills, and personal loans will usually be discharged, while debt that you are deemed responsible for—such as taxes, child or family support, or debt as a result of fraudulent activity— will not be forgiven. Student loans are another example of debt that will usually not be discharged. These are all reasons that it’s important to fully understand bankruptcy law. Filing bankruptcy with expectations of erasing all debt can be damaging and disappointing. A good disability lawyer will assess your financial situation and help find the best option.

A Pre-Bankruptcy Spending-Spree Will Be Erased

The idea that filing bankruptcy will erase your debt just might give you the notion to treat yourself to a shopping spree. You’re not alone in that idea, but you’re also not informed. Usually, those who spend a lot of money right before filing bankruptcy end up being held responsible for that debt; spending that money with the intentions of it being included when filing bankruptcy is considered fraud, and money owed as a result of fraud will not be forgiven.

Filing Bankruptcy Solves All Financial Problems

If you find yourself in a position where you can’t pay your bills and even meet minimum payments on your debt, your credit score is probably declining, as is, so bankruptcy may be a good option for you. However, if you’ve acquired that debt as a result of reckless spending and living above your means, you are in need of financial intervention beyond what filing bankruptcy can provide. It may help you for now, but what is to keep you from getting yourself right back into the same situation?

Additionally, if you make too much money to file a Chapter 7 bankruptcy, your only option will be a Chapter 13 bankruptcy, which still requires you to pay your debt back. Filing for bankruptcy is not a quick and easy, “get out of debt free” card.

Paying Off Your Debt is a Better Option

Some people will avoid filing bankruptcy at all costs because of the way it affects financial records. However, if your credit is taking one blow after another because you can’t keep up with payments and bills, bankruptcy might be your only chance at getting back in control of your finances.

Filing Bankruptcy is a Personal Failure

Among some, there is a dark cloud around filing for bankruptcy that causes feelings of personal failure. It may not be an ideal situation, but it’s not always a result of irresponsibility or financial negligence. Sometimes life throws curve balls that we can’t dodge. There are many reasons, beyond personal control, that a person can end up filing for bankruptcy.

Filing Bankruptcy Will Ruin Your Financial Future

Don’t let fear of this blemish on your financial rap sheet keep you from exploring what could be your only shot at financial freedom. Being weighed down by bills that you can’t pay, and letting your credit decrease over a longer period of time, can let the process get dragged out longer than necessary. Schedule a free consultation with a disability attorney at RGG Law today to explore your options and find out the best way to move forward.