Four Common Myths About Bankruptcy

Unexpected events happen all the time in life. When they do, it can cause you to get overwhelmed with debt. Job losses, a death in the family, an accident or illness, marital breakups, and other situations can result in added bills or falling behind on monthly payments. Once it reaches a point at which you have accounts with collection agencies who are threatening legal action, filing for bankruptcy may be your best option. A Chapter 7 bankruptcy can eliminate unsecured debts, giving you the fresh start you need.

Unfortunately, many people have false ideas about bankruptcy and fail to consider it as an option. As a result, they continue to try and play ‘catch up’ with their debts, often only making the problem worse. The following are four common myths about bankruptcy, which may be standing in the way of your financial recovery:

1. Bankruptcy is only an option for businesses or people with lots of debt.

You may have heard about private companies or corporations filing for bankruptcy or assume it was something that only benefits people with high debts. While bankruptcy does apply in these cases, the fact is that it can help people in a variety of situations regain their financial footing.

2. Bankruptcy is something dishonest people use to avoid paying their bills.

Filing for bankruptcy is not a reflection on your character. The U.S. Bankruptcy Courts designed bankruptcy as a way to protect honest, hard-working people from getting overwhelmed with debt or falling prey to predatory lending practices.

3. Bankruptcy will ruin your credit score.

Bankruptcy does lower your credit score, but it is likely to do less harm than continuing to struggle in paying off your debts. Carrying high credit card balances, falling behind on payments, and having judgments or liens filed against you does more damage, while penalties and interest rates prevent these debts from ever getting repaid.  

4. Bankruptcy will prevent you from getting loans or credit cards in the future.

You may be surprised to find yourself getting offers for credit cards soon after your bankruptcy. These may have a high-interest rate or offer a low available balance, but paying them off each month can help rebuild your credit. Market Watch advises that a secured credit card or loan is an option, as well.

Our Michigan Bankruptcy Attorney can Answer Your Questions

If you are struggling with debt, the Law Office of Karen E. Evangelista, P.C. can answer your questions about bankruptcy and advise you on whether it may be an option in your case. Contact our Rochester bankruptcy attorney today to request a free, no obligation consultation.