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Bankruptcy filing is often misunderstood by people with debt
While filing for debt relief isn’t easy, it’s not as difficult as you might expect
Many people with problem debt who should be filing for debt relief through bankruptcy courts are shying away because they misunderstand the process. That’s unfortunate, but many myths persist about debt relief, and people would be better off if they understood the process.
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Many bankruptcy myths just won’t go away
Millions of people have problems with debt, and many businesses exist to help them with their problems. We have credit counseling, debt consolidation lending and of course, bankruptcy attorneys who can assist people with the last resort of filing for debt relief through the courts. This last step is rightly called the last resort; people with debt should only file for bankruptcy if they have no other options. It happens, often as a result of job loss or illness, and it is nothing to be ashamed of. The whole purpose of bankruptcy filing is to help people with financial problems get a fresh start.
Unfortunately, many people who should be filing for debt relief are not, and many of the reasons are due to persistent misconceptions about the process. We will look at a few of these myths and explain them in detail:
- A new law prevents filing for bankruptcy - Congress did pass new legislation in 2005 that made it more difficult for some people to file for bankruptcy. Studies show that some 97% of people who have filed since the new law took effect still qualify just as they would have before the new law took effect.
- Filing will take away everything you own - Not true. While laws vary from state to state, most states will still permit you to keep a vehicle and your home. The objective of a bankruptcy filing is to help you out of your debt problems,. It is not to punish you and make you start over with nothing but the shirt on your back.
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- You will not be able to obtain credit - While the bankruptcy filing will remain on your credit report for up to ten years, it will not prevent you from obtaining credit in the future. It may make it difficult to obtain inexpensive credit, but you may find that getting credit of any sort is actually easier after a bankruptcy filing. Once you have filed, you cannot file again for eight years, and lenders know that. As such, they consider you a good potential customer. Credit cards will come. Auto loans and mortgages, on the other hand, will be more difficult to obtain and more expensive if you can obtain them.
- I don’t want people to think I’m a deadbeat - Studies show that most people file for bankruptcy after the loss of a job or a catastrophic illness or injury. The new law was passed in 2005 because the credit industry insisted that most people were deadbeats, but it just isn’t the case. If you think about people you have known who have filed, you will probably realize that the notion of a bankruptcy filer as a deadbeat is a mistaken one.
Filing for debt relief isn’t easy, but in some cases, it is a necessity. Don’t let fear or misunderstandings about the process put you off if filing to have your obligations eliminated is your best course of action. If you are in doubt, you should probably consult with an attorney or a credit counselor.
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