Unraveling Bankruptcy Myths

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Unraveling Bankruptcy Myths – Common Misconceptions about Bankruptcy

Bankruptcy is commonly thought of as a result of reckless spending. Many people believe in the adage, a fool, and his money soon part ways. Well, that is not always true, especially in bankruptcy cases. There might be a number of reasons why people have to file for bankruptcy, what happens after filing for bankruptcy and how is the credit score affected for debtors and bankruptcy filers. Here’s a look at some of the most common misconceptions related to bankruptcy and professional opinions of Los Angeles based bankruptcy law firm Recovery Law Group lawyers on them.

Myth 1: Bankruptcy Filers are Careless Clients

While it won’t be incorrect to think that people end up in financial trouble like bankruptcy when they spend recklessly, it is wrong to assume that all cases of bankruptcy are because of this reason. A huge change in life such as a messy divorce with huge alimony to pay, severe illness and treatment amounting to humongous medical bills or continuous unemployment can also contribute to a person filing for bankruptcy. Statistics suggest that unemployment and the burden of huge medical bills is one of the most common reasons for bankruptcy issues.

Myth 2: Any & All Debts Acquired Prior to Filing for Bankruptcy are Discharged

Though a majority portion of any consumer’s debt is discharged, it is wrong to assume that all debts prior to filing for bankruptcy will be discharged. Clean debts like tax payments, child support or court-mandated compensation fees for people who have committed crime from financial slate, etc. cannot be avoided. People who try and run up credit card bills before filing for bankruptcy can additionally face charges of fraud. The debt so incurred is their responsibility.

Myth 3: Your Credit Score is Damaged Permanently when you file for Bankruptcy

One of the most common myth is actually not true. Post-bankruptcy filing, debtors can start rebuilding their credit score by applying for a secured credit card. Their credit score can be improved by making timely monthly payments to clear their debts.

This gives you an idea of how incorrect your approach towards bankruptcy can be. In case you are struggling with financial issues and are contemplating to file for bankruptcy, contact a specialist and discuss your concerns and queries to get a better, clearer picture of the same.