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Dispelling Bankruptcy’s Myths (Myths 6-10)

In the last blog we explored 5 myths about bankruptcy that might be holding you back from seeking financial help. I hope it cleared up some questions you may have. We will finish up with 5 more myths that may be occupying your belfry.

MYTH #6: Bankruptcy Erases All Of Your Debt

One type of debt that bankruptcy does not erase is secured debt like mortgages and car loans. Only through certain procedures can you modify some liens, but for the most part secured debt remains. There are also other debts that are not discharged such as support, student loans, certain taxes, and intentional torts. It is therefore important that you know what your financial situation will be when you complete the bankruptcy before you file. Otherwise, without proper planning, you could make your situation worse than it already is.

MYTH #7: All Bankruptcy Filers Are Financially Irresponsible People

The old saying goes to walk a mile in a man’s shoes before judging him. This adage is particularly applicable to bankruptcy. One study attributed 62% of all bankruptcies to medical bills or income lost due to illness. Marital difficulties is also cited as a major cause of economic stress. Some filers are overextended on student loans or other types of credit. Filing bankruptcy does not indicate that you are a bad person. Even if you had a hand in your financial woes, it is no sin to fall down; it is only a sin not to get back up. Once you realize that you need help in getting up, it is time to contact a bankruptcy attorney to help you.

MYTH #8: Everyone Will Know That You Filed Bankruptcy

There was a day when local newspapers would publish the names of bankruptcy filers along with those who filed divorce and other public events. Eventually they realized that the space could be better used because no one cared. Everyone has bad days. Some people just complain like the dog laying on a tack who feels discomfort but not enough to actually do something about it. Others take control of their lives and move beyond their discomforts by effectively dealing with the issue. About 2,700 people in our area filed for bankruptcy last year. How many do you know? Do you care?

MYTH #9: I Must Be Broke To File Bankruptcy

As indicated previously, most people file bankruptcy to protect assets. They either need to discharge debt to avoid creditors taking their stuff or need to enter into a payment plan to protect their home or car. Bankruptcy should be used as a last resort but it should be considered long before unnecessary delay creates long-term problems. One impoverished filer asked the Supreme Court to waive the filing fees for his bankruptcy but was denied. While that rule has since changed, the Court emphasizes that protecting the assets comes at the price of the filing fees. If you are broke, you may not need a bankruptcy.

MYTH #10: What Is Your Myth?

This list is not intended to dispel all of the potential myths floating out there. If you hesitate to consider bankruptcy because of a potential misconception, contact us. We give second chances on Second Street.