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If your debts are too overwhelming and you find it impossible to make ends meet, you may need to weigh your options to regain control of your financial situation. As you evaluate your alternatives, you’ll discover that bankruptcy is one of the most effective legal solutions for getting rid of most of your debts. However, there are many common bankruptcy myths around the subject.
Historically, many have perceived bankruptcy as “an unthinkable option” since they believe it will “ruin their financial future.” However, the truth is that the benefits of bankruptcy outweigh its negatives in most cases. After all, it could be exactly what you need to get debt relief and start rebuilding your finances.
To know if bankruptcy is the right choice for you, you need to know how to tell facts from fiction. That’s why here, you’ll learn about seven common bankruptcy myths and the truths behind them.
Myth #1: Married couples have to file together
- Myth #1: Married couples have to file together
- Myth #2: You’ll lose everything after you file
- Myth #3: Bankruptcy eliminates all debt
- Myth #4: You don’t need an attorney to file for bankruptcy
- Myth #5: It’s okay to spend a lot before filing
- Myth #6: You’ll lose your job after filing for bankruptcy
- Myth #7: Paying your debts is always a better option
“If my spouse files for bankruptcy, am I obligated to file as well?” In short, the answer to this question is no. Although it may seem mandatory for married couples to file for bankruptcy jointly, you won’t be obligated to file for bankruptcy even if your spouse chooses to do so.
In many cases, only one spouse likely has significant debts to their name, and bankruptcy may be the best option to get rid of them. However, if the debts are shared between the two of you, then both of you should file for bankruptcy to discharge the debts effectively.
If you incurred debts along with your spouse and only one of you filed for bankruptcy, creditors may demand full payment of the debt from the non-filing spouse.
Myth #2: You’ll lose everything after you file
Another common myth regarding bankruptcy is that you will have to sell all of your belongings to pay off your debts if you decide to file. This is entirely false. You may have to sell some of your assets, but not all of them.
Before you file for bankruptcy, you can exempt some of your most valuable possessions from the process. Your house, a modest car, clothes, furniture, work tools, and much more could be included among the exemptions, and these assets won’t be affected by the process in any way.
Now, you should keep in mind that in Chapter 7 bankruptcy, you may have to sell some non-essential assets, such as jewelry, valuable collections, luxury items, among other things, to pay off creditors.
Myth #3: Bankruptcy eliminates all debt
Another misconception that some people believe is that bankruptcy is a miracle solution that will instantly free you from all your debts. Don’t believe the hype; bankruptcy may have many benefits, but it won’t discharge all of your debts.
Certain debts are classified as “secured debts,” which cannot be eliminated through bankruptcy. These include alimony, child support, personal injury debts, student loans, certain taxes, and debts you failed to include in the bankruptcy paperwork.
Myth #4: You don’t need an attorney to file for bankruptcy
You will find many DIY bankruptcy forms online and many sites that claim you don’t need an attorney to file successfully. While you can file bankruptcy without the help of an attorney, it is not recommended that you do so if you want to get it right.
If you choose to work with a Los Angeles bankruptcy attorney, such as KT Bankruptcy Lawyer, you will maximize the chances of success of your filing.
The attorney will help you determine the correct type of bankruptcy for your financial situation and guide you through the process to avoid unnecessary mistakes along the way. Overall, it is beneficial to have an attorney by your side when filing for bankruptcy.
Myth #5: It’s okay to spend a lot before filing
“As bankruptcy will eliminate all my debts, I’m going to max out my credit cards to spend as much as I can.” This common bankruptcy myth could get you into a lot of trouble.
Since Chapter 7 bankruptcy will eliminate your credit card debt, it may seem like you can spend recklessly before your filing, given that you won’t have to pay that money back.
However, the truth is that the bankruptcy court will review your recent finances, and if they discover that you have been spending too much to take advantage of the process, it could be deemed as fraud. Consequently, your filing may be dismissed, and you may even face legal charges.
Myth #6: You’ll lose your job after filing for bankruptcy
You may need to file for bankruptcy but choose not to do so because you fear it could cause you to lose your job or that potential employers may decide not to hire you due to it.
Don’t worry; although your bankruptcy filing will be in the public record, your employer probably won’t know about your filing unless you choose to tell them.
Furthermore, most employers are not allowed to fire you or discriminate against you in any way just because you filed for bankruptcy.
Myth #7: Paying your debts is always a better option
Filing for bankruptcy is a life-changing financial decision. But that doesn’t mean it’s a bad idea or even a last resort if all else fails. Actually, it’s an ingenious way to eliminate debts you can’t afford to pay.
Some people will tell you that paying off your debts will always be preferable to filing bankruptcy, but this is simply not true. For example, if you owe more than 50% of your income, you may sink into debt for many years before you can finally get out of it. In those situations, bankruptcy will be the wisest option if you want to live a debt-free life.
Conclusion – Common Bankruptcy Myths
Bankruptcy may not be the silver bullet that some people think it is, but it’s also not an entirely negative process that will destroy your finances. The truth is that bankruptcy is a helpful legal solution that can help you get the fresh financial start you need to find success further down the road.
If you want to learn more about bankruptcy, you should consider calling a bankruptcy attorney near you for a free consultation. The attorney will analyze your financial situation and advise you on what you should do to make your filing a success.