Bankruptcy is a common occurrence, with over 400,000 bankruptcy filings in the United States in 2021. And as bankruptcy lawyers will tell you, this number was down 24% compared with the year before.
As common as bankruptcy is, it continues to carry a stigma for many Americans. It’s associated with many misconceptions that confuse the average individual.
This post will debunk five of the most common myths and instead look at the realities of bankruptcy. We’ll also look at how experienced legal representation can help you negotiate the bankruptcy process and help things go a lot smoother.
Common bankruptcy myths
Here are five of the most enduring bankruptcy myths out there.
You will lose everything
This is not true. While filing for Chapter 7 bankruptcy may liquidate some of your assets, you won’t lose all your possessions. Most property is exempt from bankruptcy, although assets considered exempt vary from state to state.
The purpose of bankruptcy is to give folks a fresh start. To have a chance at a fresh start, you need certain essentials like clothing to wear to work, a car to drive to work, and a house to live in. This exemption doesn’t mean if you own an expensive car or unnecessary luxury goods that you automatically get to keep them. But you do get to hold on to the essentials.
Bankruptcy discharges all debt
Filing under Chapter 7 bankruptcy will get rid of most of your unsecured debt and give you a fresh start. Your legal representation may be able to discharge some types of unsecured debt. However, there are some debts you can’t get rid of through bankruptcy. Bankruptcy can’t discharge tax debt, student loans, child support, or spousal support payments.
People who file for bankruptcy are financially irresponsible
This statement is a myth that’s hard to shake. The truth is, most people who file for bankruptcy are hardworking individuals who found they couldn’t keep up with payments and went into debt. Most of the time, this is due to unforeseen circumstances, such as job loss, an illness, or global pandemics. If you file for bankruptcy, it doesn’t mean you’re financially irresponsible.
It’s OK to spend recklessly before declaring bankruptcy
Filing for bankruptcy will discharge your credit card debt. This opportunity may seem like a good excuse to go wild with your credit cards and buy everything you’ve ever wanted before you get to court. So why not cash in?
Racking up needless expenses on your credit card before filing is not a good idea. As your bankruptcy lawyers will tell you, spending recklessly with credit cards before filing for bankruptcy is considered fraud by the courts. Any debt you have due to fraud isn’t discharged in bankruptcy. This means you’ll find yourself paying for your pre-bankruptcy spending spree.
Married couples both have to file
This is also not true. There may be many circumstances where only one spouse is responsible for a significant amount of debt. Only one spouse needs to file for bankruptcy in this case. If both spouses share liability, they both need to file. Otherwise, the creditors can still come after the other spouse. Speaking with bankruptcy lawyers to find the best plan for your situation is smart.
How to find bankruptcy lawyers near me
Suppose you’re struggling with debt and considering filing for bankruptcy. In that case, it’s essential you get expert advice and legal representation for your case. LegalASAP can connect you with experienced and trustworthy bankruptcy lawyers in your area who are available to advise on your use. Complete our free evaluation today to see if you may qualify.