5 Bankruptcy Myths and Why They Aren’t True

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Life After Bankruptcy: Five Ways To Get Back On Your Feet
September 22, 2019
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Whether you’ve known someone who has filed for bankruptcy or not, there are some bankruptcy myths that most people believe to be true. Some of the most common bankruptcy lies we’ve been fed to believe are simply because many people do not understand the complex nature of personal or business bankruptcy in Naples. However, because of these myths, many people throughout the United States have avoided bankruptcy when it may have been the more appropriate option for their financial situation. 

Today on the blog, we will shed some light on the five most common bankruptcy myths and why they are only myths and nothing more. 

Bankruptcy Equals Failure

Annoyed and anxious adult

Potentially one of the most harmful myths to people that may be struggling financially, the idea the bankruptcy equals failure is just not true. Rather than something to be ashamed of, bankruptcy should be seen as a means to regain financial control. Often, bankruptcy needs to be filed because a situation or event occurred that was out of the person’s control, such as being let go from a well-paying job, divorce, or a medical emergency. As stated by this article from NerdWallet, “Given that roughly 57% of bankruptcies in 2009 were a result of medical bills and that over the past decade the cost of medical deductibles has grown seven times faster than wages have risen, many bankruptcies are likely the result of stagnant wages rather than poor financial management.”

Filing for bankruptcy does not equate to someone throwing in the towel; it instead denotes a person who is ready to take control of their financial situation. 

Bankruptcy Will Destroy Your Credit Forever

Many people will avoid filing for bankruptcy with the help of a bankruptcy lawyer in Naples because they are unsure if they will ever be able to apply for a loan or buy a home. While filing for bankruptcy will put a significant dent in your credit for seven to ten years, it won’t ruin your credit forever. You may even start to see credit offers in the mail a few months or even weeks after your bankruptcy case is finalized. The reason for this? Many creditors will see you as less of a credit risk because most, if not all, of your debt has been wiped clean. 

If you are concerned about what filing bankruptcy will do to your credit score, there are ways that you can work on building your credit after filing. One option is getting a secured credit card. Our Naples bankruptcy lawyers recommend waiting until you are in a financially secure place before applying for a secured credit card to start restoring your credit after bankruptcy. 

Conversely, when a person who is facing financial failure refuses to seek help through bankruptcy, consolidation, or any other means and is unable to make their payments, their credit score will drop dramatically.

Bankruptcy Will Remove All Your Debt

Another large myth surrounding bankruptcy is that it will abolish all of your debt, unfortunately this isn’t always the case. Bankruptcy is a tool that is used to discharge unsecured debts and secured debts such as a car or home; unless you plan on keeping said car or home. When you file for Chapter 7 or Chapter 13 bankruptcy, whether it be personal or business bankruptcy in Naples, most of your debt will be eliminated. Debt that is typically eliminated in bankruptcy proceedings includes credit cards, medical expenses, and personal loans. If you’re planning on filing bankruptcy, don’t expect any of the following debts to be removed:

*Student loan debt is typically extremely challenging to have discharged through bankruptcy. However, it is not impossible. If student loans are the leading cause of your financial duress, Miller, Hollander, & Jeda can help. Find out if you qualify for student loan forgiveness with our Student Loan Modification Program, here. You can also discuss your financial situation by contacting one of our Naples bankruptcy lawyers today

You Can Only File Bankruptcy Once

Many people end up filing bankruptcy due to situations beyond their control; the same is true for people who may need to file bankruptcy a second time. One of the myths circulating around bankruptcy is that you can only file once; this is false. If you do find yourself in a situation where you may considering filing bankruptcy for a second time, it is best to discuss your options with a financial advisor or bankruptcy lawyer in Naples before doing so. With this in mind, here are the stipulations for filing bankruptcy more than once:

  • Chapter 7 Bankruptcy – Chapter 7 bankruptcy can be filed once every eight years.
  • Chapter 13 Bankruptcy – Chapter 13 bankruptcy can be filed once every two years. It usually takes around three to five years for a filer to complete the terms of bankruptcy, which means that after the conditions have been met, a person can file for a new Chapter 13 immediately. 

Hiring A Bankruptcy Attorney Is Unnecessary 

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When your facing bankruptcy, hiring an attorney seems like the least financially responsible thing to do at first glance. Additionally, filing for bankruptcy itself is an expensive process. The idea that “going it alone” and filing bankruptcy without an attorney is a good idea, is not only untrue, but it could also end up costing you more money. Personal and business bankruptcy in Naples is a complicated and exhausting process that needs to be executed by a professional; a bankruptcy lawyer. For example, if your petition even has the smallest of mistakes, it could potentially be thrown out.

Furthermore, experienced bankruptcy attorneys will be able to uncover additional debts that can be discharged or assets that can be kept without penalty that an inexperienced person may miss. This article from Hello Resolve goes on to point out the success rates of hiring an attorney to represent your bankruptcy case, “The success rates for filing with and without an attorney tell a pretty clear story. For Chapter 7, people who represented themselves were successful 66.7% of the time versus a 96.2% success rate if they used a lawyer. For Chapter 13, people who didn’t use a lawyer were successful just 2.3% of the time versus a 41.5% success rate with a lawyer.”

To put it simply, when it comes to hiring a bankruptcy lawyer in Naples, the numbers don’t lie. 

If you’re considering filing bankruptcy, contact Miller, Hollander, & Jeda today to discuss what options make the most sense for your current financial situation.