When it comes to the world of bankruptcy, there are misconceptions that keep people from exploring their options when they need them most. When you feel like you are drowning in debt and are worried, you may think filing for bankruptcy is not a good thing to do. But that is actually one of the biggest misconceptions.
Bankruptcy was once widely considered a last resort to be used when all other resources have been exhausted. But what many folks didn’t realize is that bankruptcy is a right in our U.S. legal system to help people get back on their feet financially. The United States has had bankruptcy laws since the 1700’s and Article I, Section 8, of the United States Constitution authorizes Congress to enact “uniform Laws on the subject of Bankruptcies” for the benefit of debtors who are United States citizens.
Myths hold people back from the bankruptcy protections that are their rights. In this blog, learn more about three common bankruptcy myths and the truth behind the benefits of filing for bankruptcy for people that need it.
Myth #1: Bankruptcy is a Last Resort
A lot of people think that bankruptcy is something to use only when you’ve exhausted all other options. But the truth is, bankruptcy is not the last resort. If you’re struggling with debt to the point that you’re continually stressed out, now is the time to consider bankruptcy as an option. Gathering information on possible solutions to your problems is a good idea and you may find filing is right for you.
If you’re facing a large amount of debt that you cannot pay back, bankruptcy is there to protect you. It’s a way to get back on your feet sooner rather than later. It may be a good option for you and certainly worth talking with a bankruptcy specialist like Bill Kain or Margaret Henehan. Even if you do not exercise the right to file at that moment, it is certainly worth knowing how the bankruptcy process could help your particular situation. Major life changes like a job loss, divorce, or unexpected medical issues can quickly put you in a debt crisis. If this is the case, you can file for Chapter 7 bankruptcy or Chapter 13 bankruptcy to help manage your debt. Filing bankruptcy doesn’t have to be the last resort but rather the right solution to get out from under troubling debt.
Myth #2: Bankruptcy Ruins Your Credit for 7 Years
This is another misconception that keeps people from exploring their options when it comes to bankruptcy. This stems from the fact that a bankruptcy will be on your credit report for 7 to 10 years depending on the type of bankruptcy filed. In reality, bankruptcy doesn’t ruin your credit. In fact, it can help your credit score eventually. As your positive habits impact, you will see an improvement in your credit score and eventually the bankruptcy falls off your credit report all together.
When you file for bankruptcy, you are required to get credit counseling to learn about your options for repayment. Credit counselors help you create a repayment plan and develop a budget for your future spending. These steps lead to better credit.
Your credit score will lower if you continually miss making payments and don’t pay off your debts and your creditors pressure you to pay up. Bankruptcy can help you get back on track financially.
Myth #3: You’ll Lose Everything
This is another misconception that has people avoid bankruptcy. But the truth is, you’re not going to lose everything once you file for bankruptcy. In fact, many people do not have to liquidate personal possessions such as their houses or cars.
In Chapter 7 bankruptcy, you’ll likely lose any property that isn’t necessary for day-to-day living. Chapter 7 is for people who have a lot of unsecured debt, such as credit card debt and medical bills, and incomes below a certain earning threshold.
In Chapter 13 bankruptcy, you’ll pay off some or all of your debt and will keep your property. You’ll repay your creditors a percentage of what you owe over three to five years. This is sometimes referred to as a repayment plan.
Bankruptcy is Your Protected Right
The ability to file for bankruptcy protection is your right. If you decide to opt for debt consolidation services in lieu of filing for bankruptcy, you could miss out on some of the protections available to you. Bankruptcy is a safety net to help you restart your life financially.
Get Support from Local St. Cloud Professionals
Bankruptcy is not something to fear. It’s an important part of the U.S. legal system as a protection to help people get back on their feet after financial hardship. When you file for bankruptcy, it doesn’t ruin your credit like many people think it will. In some ways, filing for bankruptcy can eventually help your credit get on track again.
Kain + Henehan is ready and available to help you take the next steps toward getting your financial health back. If you are looking for a knowledgeable and empathetic bankruptcy attorney in the St. Cloud, Minnesota area or in the Twin Cities area, we can answer any questions that you might have. We assist clients throughout Minnesota. Contact us by calling (612) 438-8006 or filling out the online form.