The 5 Biggest Myths of Filing Bankruptcy
Bankruptcies are some of the most misunderstood legal proceedings today, even though there were over 900,000 bankruptcies in the U.S. in 2014. Here are just a few of the biggest misconceptions that bankruptcy lawyers hear every day:
- Myth 1: If you’re considering filing for bankruptcy, you obviously can’t manage your finances well
The truth is, many people file for bankruptcy because of an unexpected injury, illness, or accident. Even the most experienced personal injury lawyers net an average of $60,000 for their clients when a lawsuit has concluded, and the medical bills of a serious injury can be much higher than what’s awarded. One-fifth of all simple slip/fall incidents require 31 days off from work, and just losing your regular income can cause serious financial repercussions in no time. Other causes of bankruptcy can include student loan bills, emergency home repairs, or losing a job.
- Myth 2: You can’t be too broke to file for bankruptcy
Actually, filing for bankruptcy does cost money and if you can’t afford these costs, then you might not be able to claim bankruptcy. The average civil lawsuit costs an individual around $809 today, and individuals will find that they need to pay administrative fees too, along with the fees of their bankruptcy lawyer.
- Myth 3: Declaring bankruptcy wipes your financial slate clean
Although most debts can be reduced or wiped out completely, there are certain payments which cannot be avoided even if you have the best bankruptcy attorney on your case. These debts include student loan payments and child support payments, and if you’re paying restitution because of a past crime, you’ll still have to make those payments, as well.
- Myth 4: Only your cash can be confiscated during a bankruptcy lawsuit
Your bank account funds are just one of your financial assets; everything from your home to any valuable collectibles you own may be taken by the court and used to repay your debts. It’s important to have a knowledgeable bankruptcy lawyer on your side because certain necessities, such as your car, may be exempt in certain cases.
- Myth 5: Bankruptcy is an easy way out of your financial troubles
Yes, filing for bankruptcy is often considered a “quick fix” because so many debts can be reduced so quickly; however, the implications of filing for bankruptcy can linger for years on end. Your credit score, for example, will likely be affected for around seven to 10 years after claiming bankruptcy, even if you have perfect financial management during that time.
If you’re filing for bankruptcy, you have a long road ahead of you. The important thing to remember is that you don’t have to do it alone, and you can always prepare for the next step.