Recovering from Financial Ruin

Top Bankruptcy Myths

30 July 2021 by Veeti Lepisto

If you're unable to stay up to date with your financial obligations, it may be time you filed for bankruptcy. It's advisable to seek the counsel of a bankruptcy attorney to determine your options. Here are some top bankruptcy myths.

Bankruptcy Makes You Uncreditworthy

Filing for bankruptcy doesn't mean you aren't credit-worthy. Your access to credit will be limited for the ten years bankruptcy stays on your report. After your debt is discharged, you'll receive credit card offers.

According to a 2010 report by the Philadelphia's Federal Reserve Bank, people who filed Chapter 7 bankruptcy had a credit score ranging from 538.2. These scores jumped to 620 in the six months the bankruptcies were finalized. This shows that your credit will hardly be affected if you were to file for bankruptcy.

Filing for Bankruptcy Will Lead to an Audit

Filing for bankruptcy involves filling out various forms. Some information you'll be required to submit includes bank statements, tax returns, and paystubs. You'll also be required to provide the value of your property and a list of your debts.

After filing for bankruptcy, the trustee dealing with your case may ask for additional financial documentation. However, audits are rare. The audit rate is approximately 1 in every 1,000 cases filed.

You Must Be Broke to File for Bankruptcy

You don't necessarily have to be destitute to file for bankruptcy. If you own a home, other assets, or are employed, you may still be eligible to file for bankruptcy. You may also be able to retain most of your assets.

In general, bankruptcies can be filed by anyone in the public. Since there are different kinds of bankruptcies, your goals and financial condition will determine the bankruptcy that's right for you.

Bankruptcy Discharges All Debts

One of the main reasons many people file for bankruptcy is to get a fresh start. However, you cannot discharge some certain debts by filing for bankruptcy. For example, child support or alimony cannot be discharged.

Student loan debts cannot be discharged unless you have proof of hardship. On the other hand, tax debts are discharged or reduced based on your specific circumstances, like the duration of the debt. Also, restitution and criminal fines that are imposed as part of a court sentence cannot be discharged.

In Conclusion

Filing for bankruptcy isn't as easy as declaring your financial position and being discharged from debts. You'll be required to take a means test to determine whether you qualify for a specific bankruptcy chapter. You may also have to go through credit counseling. If you're thinking of filing for bankruptcy, talk to a bankruptcy lawyer for financial and legal advice.

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