Bankruptcy Myths You Must Know

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Busting Common Bankruptcy Associated Myths

There are many myths when it comes to bankruptcy; many of which are spread with a malicious intent of scaring debtors into filing for bankruptcy. However, most of them are just myths with no basis for truth. Bankruptcy Laws have been designed to offer people suffering from a severe financial crisis, a fresh financial start. Instead of believing everything you hear about bankruptcy, it is better to consult a good lawyer to sieve through the misinformation circulating around and filter the facts for you. Believing the myths will give you a wrong idea about bankruptcy that can cause you or your loved ones to make errors in your financial journey which will have long term detrimental effects.

To successfully understand the process of bankruptcy, it is important that the bankruptcy myths are properly addressed by professionals. Some of the most common myths associated with bankruptcy, as per lawyers of the Los Angeles based law firm Recovery Law Group are:

  • Bankruptcy can help eliminate all past debts. Though bankruptcy offers a fresh start, it is not a complete washing of your financial slate and handling you a blank one. Filing for bankruptcy doesn’t mean that you have to pay any money that you owe. Several debts like alimony, child support, student loan payments, restitution payments, etc. are not discharged by bankruptcy and you will have to pay for them. If you have filed your taxes, there may be a chance that related tax debts you have to get reduced or eliminated, otherwise, these debts also remain.
  • Bankruptcy permanently destroys your credit. Filing for bankruptcy does affect your credit, but this is temporary and you can rebuild your credit score as well as history post your bankruptcy discharge. Once you have cleared all your dues and get a fresh start, credit card companies approach you with a new line of secure credit cards. It is important to get a low-limit card and make regular on-time payments on them to improve your credit score. Once you have to rebuild your credit history, you can get a regular credit card. However, it is important to make regular payments to not fall back on bad times financially.
  • Bankruptcy filers are generally financially irresponsible people. Nothing could be farther from the truth as many times personal problems like unemployment, huge medical bills, expensive divorce settlements can wipe anyone financially. These kinds of financial problems can happen with even the best people. Many people file for bankruptcy due to such financial issues on a regular basis as bankruptcy helps them overcome the financial losses incurred due to no fault of theirs.
  • Spending sprees before bankruptcy filing are not be repaid. Going on a spending spree just prior to filing for bankruptcy is viewed as a fraudulent activity by the court. The debts thus incurred are not dischargeable and you will have to pay for them even if you file for bankruptcy. In fact, with such activities, you will have hampered your bankruptcy case and also exposed yourself to criminal allegations. Just because you are filing for bankruptcy doesn’t allow you to go ahead and splurge as you can end up in deeper troubles than you already are.

Though bankruptcy is a no financial cure for all, yet it is one of the best ways to get over troubled financial times. Get a fresh start and regain financial independence by asking bankruptcy lawyers for all options available for you.