Many people have heard about bankruptcy, but are not exactly certain about what it entails. As a result, many myths about the process and how it affects filers have circulated throughout the years. Consequently, it is important for you to understand how the most persistent rumors are simply not true, so you will not be discouraged from getting the help you need if you find yourself in financial trouble.
Bankruptcy will cause me to lose everything
Probably the most persistent myth about bankruptcy is that filing it will result in the sale of all your assets. Although Chapter 7 involves the selling of property to pay off creditors, most of your important property is likely exempt from the sale by federal or New Jersey law. As a result, most of those truly in financial need lose nothing by filing Chapter 7.
Even if you are among the few who stand to lose property in Chapter 7, there is always Chapter 13. Under this type of bankruptcy, you get to keep all your property as your debts are consolidated.
Bankruptcy will ruin my credit score forever
Although filing bankruptcy can stay on your credit report for 10 years, this does not mean that you will have horrible credit the entire time. Although bankruptcy will initially cause your credit score to fall, this is only temporary. After you complete your bankruptcy, you will find that lenders and credit card issuers are willing to work with you, despite your previous bankruptcy, which gives you the opportunity to rebuild your credit. Most filers find that if they pay off their bills on time each month and use credit responsibly, their credit scores will return to respectable levels in 1-2 years.
Filing bankruptcy means I’m a failure
Many people are afraid of filing bankruptcy because they think it demonstrates that they are failures or irresponsible spenders. However, filing bankruptcy, instead of doing nothing and getting further into debt, is accepting responsibility and working to prevent a problem from getting worse.
In fact, most bankruptcies are caused not by frivolous spending, but by something that is unforeseeable. Medical bills are the leading cause of bankruptcy filings. Most of the remaining reasons why people file bankruptcy stem from factors beyond the filer’s control, such as a job loss, death in the family or divorce.
The bottom line is you should not let fear or misplaced pride prevent you from seeking help, if you are feeling the financial pinch. The experienced bankruptcy attorneys at Mariano & Coiro, P.C. can explain your available debt relief options, including bankruptcy, and recommend the best course of action for your unique situation.