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Do you believe these bankruptcy myths?

On Behalf of | Feb 5, 2021 | Chapter 13, chapter 7 bankruptcy

Maybe you still feel uncertain about filing for bankruptcy. Could believing in myths hold you back from experiencing financial relief? 

The American Bankruptcy Institute dives into common bankruptcy misconceptions. Do not let fairy tales stand in the way of doing the right thing for your financial health. 

“You lose everything/nothing in bankruptcy”

You do not lose all your assets after filing bankruptcy, nor do you keep everything. Expect to retain your clothing, house and car, but bankruptcy exemptions vary by state. Even if something like your brand-new laptop does not qualify for exemption, a creditor may not want to take it. On the other hand, do not expect to keep luxury items that you do not need to survive, such as a boat or summer mansion. 

“Filing for bankruptcy equals financial irresponsibility”

Do not feel that financial irresponsibility led to you deciding whether to file for bankruptcy. Substantial medical debt, divorce or losing your job during a round of layoffs may all lead a person to consider the option. Some life events carry a massive financial burden that you cannot bear without help. Do not assume a role that does not apply to your situation. 

“Do not worry about massive debt racked up before filing”

Think twice before going on a spending spree in the time leading up to filing for bankruptcy. True, bankruptcy wipes away your credit card debt, but that does not include irresponsible spending incurred right before bankruptcy. Courts view engaging in frivolous spending before bankruptcy as fraud, which does not qualify for bankruptcy discharge. 

Separate fact from fiction as you navigate bankruptcy. Proper information paves the way to mental and financial reassurance.