For the average person, the idea of filing for bankruptcy likely sounds pretty awful. For many people struggling to pay their bills, bankruptcy may seem like a last resort, rock bottom, or an acknowledgment of failure. It is, after all, the worst outcome in both Wheel of Fortune and Monopoly. However, in real life bankruptcy is a tool that a person chooses to use to solve a specific problem; too much debt preventing them from living a comfortable life and providing for their family. Bankruptcy is not about punishing people for past mistakes or unfortunate circumstances; it is about helping honest people experiencing a financial difficulty get a fresh start. Unfortunately, many people who would greatly benefit from filing for bankruptcy never consider it because they fear a process that they really don’t understand.
Here Is The Truth About Five Common Bankruptcy Myths:
I Will Never Get Credit Again After I File for Bankruptcy.
False! A bankruptcy filing is but one factor in your credit score. True, a bankruptcy will stay on your credit report for up to 10 years after filing, but that does not mean you can not get credit after filing. Our clients are always surprised to learn that they can begin rebuilding their credit immediately after filing bankruptcy. After bankruptcy, people are able to obtain new credit cards and car loans in as little as one year and can even qualify for a new home mortgage in four years or less. The best way to rebuild credit after bankruptcy is to use it sparingly and responsibly. Those that do find their credit quickly recovers after they complete their case.
I Will Lose My House and My Car if I File for Bankruptcy?
Not in most cases. In Massachusetts, debtors filing for bankruptcy are allowed to “exempt” a significant amount of property from the bankruptcy process. These exemptions include up to $500,000 in equity in one’s home, provided they have recorded a declaration of homestead and $7,500 in equity in a personal vehicle. Home mortgages and car loans do not go away, and regular payments must continue to be made to keep the lender from repossessing the property later, but they will not be taken in the bankruptcy process.
Before filing for bankruptcy, it is important to examine the titles to property and ensure the homestead declaration is valid to ensure the bankruptcy exemptions will be effective.
My Employer May Fire Me if They Find Out I filed for Bankruptcy?
Not true! The Bankruptcy Code specifically prohibits any employer from demoting or firing an employee because they filed for bankruptcy. In addition, governmental entities cannot even consider a prior bankruptcy in making hiring decisions. Although private employers may decline to hire a person due to a prior bankruptcy, we have not seen evidence of this actually happening. A prior bankruptcy on your credit report may not look great to a potential employer, but neither would thousands of dollars in unpaid debts. The fact that someone took steps to address a problem is more of an indication of responsibility than someone who simply allows a problem to fester.
All My Friends and Co-workers Will Find Out That I Filed for Bankruptcy.
Very unlikely. When a person files for bankruptcy, the only people who are notified are the bankruptcy court, the United States Trustee’s office that oversees bankruptcy filings, and the creditors whose debts are being discharged. It is not published in local newspapers and is not generally publicized except in particularly newsworthy cases of celebrity filings or large companies. While the bankruptcy is a public record, a person would generally need to go to the bankruptcy court to request that information, or have a lawyer access the Court’s online database. But most people have no reason to do this. In recent years, some private companies have established databases of individual filings and, as a result, a Google search may reveal that a person has filed, but not all of the filing information itself. But really, how many people Google you?
Only Irresponsible People File for Bankruptcy.
This is the biggest bankruptcy myth of all. It has often been said that bankruptcy relief is intended for the “honest but unfortunate” and that aptly describes most people who choose to file for bankruptcy. No one ever plans to go into debt with the intention of avoiding payment by declaring bankruptcy. Bankruptcy is caused by many unfortunate life events that really could happen to almost anyone. Medical bills, loss of income, the death or illness of a family member, and divorce are common factors that people state to declare bankruptcy. Many people struggle with their debts for a long time, often too long, before seeking bankruptcy relief.
Worried About Debtor? Call us Today!
Seeking bankruptcy relief is a big decision and not one you should make without having a complete understanding of how it works and how it will affect you. If you are having difficulty paying debts and have questions about bankruptcy, call our office for a free consultation at 508-202-0681.