For many people bankruptcy is a mysterious and complicated area of law to understand. Due to its technical nature, and a ridiculous amount of legal terms that are thrown about by bankruptcy lawyers, bankruptcy might be confusing and you might not know much about it other than what you might have heard about it from your family, friends or television. Below are five common myths that many people often don’t understand about bankruptcy:
Paying Your Debts Off Is A Better Option Than Bankruptcy. Sometimes people underestimate the savings that filing for bankruptcy can provide. While we may have been taught as little children that we should repay our debts, sometimes interest rates and late charges make it impossible to repay your debts while maintaining any sort of financial freedom. Some people get themselves into debt situations where it is literally impossible to repay their debts because their monthly debt burden is greater than the amount of money they can earn in a month.
Filing For Bankruptcy Reflects Badly on You. Many people attribute a stigma to filing for bankruptcy – like filing for bankruptcy means that you are incapable of managing your money in a responsible way. This is untrue. Many people make simple money mistakes, especially early in their adult lives, that can create long term debt burdens that simply cannot be reasonably managed. You should not feel judged because you made a mistake with your money, and you most definitely should not reject the idea of filing for bankruptcy because of a silly misperception.
All You Have To Do Is Sign Some Forms To File For Bankruptcy. Filing for bankruptcy isn’t as simple as that. In addition to speaking with a bankruptcy lawyer and completing some paperwork, you are also going to have to provide copies of all of your financial records. Collecting these documents can be grueling, but it is an essential part of the bankruptcy process.
All of Your Debts Will Be Forgiven With Bankruptcy. Don’t be so quick to think that filing for bankruptcy is a cure all for your debt problems. There are some types of debts that simply cannot be discharged through bankruptcy proceedings whatsoever. For instance, overdue child support payments and student loans cannot be forgiven through bankruptcy. Even if you file for bankruptcy, any non-dischargeable debts that you hold will still have to be repaid.
You Are Going To Lose Everything by Declaring Bankruptcy. One of the biggest fears that people have about filing for bankruptcy is that everything that they own will be taken by the bankruptcy court in order to pay back creditors. This is untrue, and there are many bankruptcy exemptions that protect important pieces of property from being taken during bankruptcy. For example, there is a home exemption, a vehicle exemption, and a cash exemption.
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