No one imagines that they will ever have to file for bankruptcy in their lives. Everyone’s dream is to get a good job or start a successful business that will cater for his or her expenses and savings for life. However, things may turn around, and one finds themselves in a situation where they are unable to cover their expenses. This could be as a result of proper planning, loss of job, long-term illness, divorce among many others. In the midst of financial crisis, one of the decisions that one can make is to file for bankruptcy. Many people are not well informed on what filling bankruptcy means. Below are common myths that confuse most people.
You become debt free
Many people believe that when you file bankruptcy, you are free from debt. However, this is not the case. When you file for Chapter 13 bankruptcy, you get a new repayment plan that can last for around five years or less. For chapter 17, some of the debts are eliminated with the exception of student loans, alimony, child support, and tax. Not all the debts that are acquired within 90 days of filing for bankruptcy are eliminated especially if the court determines that you made purchases with no intention of paying back.
Bankruptcy ruins your credit completely
After bankruptcy, you can still get credit. Many people can apply for new credit cards and even mortgages after filling. One can start with a secured credit card and move on to a regular one later. However, note that most of the mortgages and car loans that you can get after filling usually come with high fees and interest rates.
You will lose all your belongings
There is a common belief that one will lose everything they own when they file for bankruptcy. This is not the case as the law allows some exceptions. What is exempted will depend on the state you are in. Before you file talks to a bankruptcy lawyer in your state to determine what you can retain.
You can’t file if you have a job
Even those with jobs can file for bankruptcy. You can, however, be disqualified if your salary is too high.
It’s better to pay off debts than file
Filing bankruptcy is a severe financial decision, but not a bad one especially if your debts are more than 50% of your annual income. If you don’t think it’s possible to clear them off within the next few years, then it better to just file than pay.
