Bankruptcy Misinformation That Could Lead You Astray

Posted on: 24 September 2018

When a person gets into financial trouble or they have to amass a large amount of debt, it can pose a major burden. Escaping from this debt will be a major goal for taking back control of your financial destiny. For many individuals, inaccurate information about bankruptcy can steer them away from this potentially effective option.

Myth: Bankruptcy Protection Only Begins When The Proceedings Are Concluded

Those with large debts may find that they are faced with aggressive action from creditors. This may include garnishing wages, seizing assets, or filing lawsuits. Those that are looking to bankruptcy for protection might assume that this protection will only take effect at the conclusion of the proceedings. However, it is common for the courts to issue injunctions that will stop creditors from collections actions.

Myth: You Must Have No Money Or Income To Qualify For Bankruptcy

Some individuals will fail to file for bankruptcy due to the assumption that only those that have no money or income will be able to apply for this protection. However, it is actually preferable for individuals to have some income when they apply for bankruptcy. This will allow them to qualify for Chapter 13 bankruptcy, which will allow individuals to retain most of their assets; they will need to provide proof that they are able to make their payments if the debts are restructured.

Myth: Filing Bankruptcy Is A Humiliating Experience

Fears of being embarrassed by the filing process can be another discouraging factor for individuals. While it is true that bankruptcy documents are technically public, it is extremely unlikely that anyone you know would go through the trouble of researching these court documents. Furthermore, your attorney will handle most of the interactions with creditors or other parties involved in the filing, and this can help to reduce any embarrassment or discomfort that you may have.

Myth: A Bankruptcy Will Permanently Prevent You From Financing A Home

Concerns about the long-term effects of filing for bankruptcy may be another reason for people to avoid seeking this type of important protection. For those that are concerned about being able to buy a home after filing for bankruptcy, it should be noted that this will eventually fall off of your credit report, which will prevent lenders from being able to see it. Also, lenders will often discount an applicant's bankruptcy if they have since established a strong history of making their payments on time and have managed their debt levels.

Reach out to a bankruptcy attorney for more information and direction.