Bankruptcy has an undeserved bad reputation. Some consider it the worst financial result for an individual. Something to avoid at all costs.
Unfortunately, this reputation means many people who could benefit from bankruptcy won’t even consider it.
It’s time to dispel the stigma around bankruptcy. Here are a few misconceptions about the process of bankruptcy:
Bankruptcy shows you’ve failed
Some people think bankruptcy equals defeat, admitting failure and asking for a bailout. This is simply not true.
Bankruptcy is a tool available to those who have taken on more debt than they can handle.
It is not an admittance of failure but rather a proactive approach to rebuilding your financial health.
Bankruptcy means you will never have good credit
Credit scores are used in everything from auto loans to housing mortgages, so it’s understandable for people to be wary of how bankruptcy affects these scores.
It’s important to remember that bankruptcy won’t cripple your credit score permanently. Over time, you can rebuild it.
On rare occasions, filing for bankruptcy will actually improve your score. Lenders are recognizing bankruptcy as a transition and not the end goal.
Bankruptcy involves losing your house
There are laws in place protecting people from losing their primary residence in almost all cases. Filing for bankruptcy does not mean losing your house or car.
Instead, it helps re-organize your payments so that you can begin lifting your debt burden.
This doesn’t mean that all property or possessions will remain untouched. Courts often view secondary property (such as a hunting cabin or a four-wheeler) fair to target but bankruptcy does not lead to homelessness.
Bankruptcy stays on your credit forever
While you have a limited number of filings available for bankruptcy (usually two), the perception that a filing shows up on any credit application you submit again is false.
Typically, a bankruptcy filing remains on credit checks for seven to ten years.
Bankruptcy doesn’t have to be scary. It can be a useful tool to reorganize your debts and get on the path toward fiscal freedom.
If you have any questions about qualifying for bankruptcy or if you are considering filing, speak with a knowledgeable attorney.