Exploding Bankruptcy Myths


Making the decision to file for bankruptcy can be stressful and confusing. Finding a reliable attorney and doing your own research can ease the burden and help eliminate confusion. There are several myths that surround the process and effects of filing for bankruptcy, and it is important to identify which are true and which are false. Debunking bankruptcy myths can make the process much less intimidating, and help you decide if bankruptcy is the right option for you.

Some people equate filing for bankruptcy with an admission of financial defeat, as if they are somehow failing at something. Truthfully, most people file for bankruptcy after a major life change not in their control. Divorce, layoffs, and major illnesses are all reasons people file for divorce that do not reflect on the person's character or value.

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Some people think that they will never be able to buy anything on credit again. In reality, credit card offers will soon be in the mailbox. Unfortunately, the interest rates will be very high. Larger purchases such as homes or automobiles will also come with higher interest rates. As time passes and the bankruptcy is not the headline of your credit report, your ability to make purchases on credit can return to normal.

You won't lose your job. It is illegal for an employer to terminate you based solely on your status as a debtor. However, if an employer has other reasons for wanting to terminate someone in addition to a bankruptcy, that is legal. An employer can only check your credit with written permission.

Not all your debts will be gone after filing Chapter 7. Your consumer debt will be gone, yes. Any debts you have through child support, alimony, student loans, taxes, or fraud will not be erased. If your debt load consists entirely of these sorts of debts, filing may not be the best option for you. Look into debt consolidation or credit counseling to help with these debts.

You won't lose everything. There are laws to protect a debtor's house, automobile, some retirement plans, and household goods. As long as you continue making payments on your home and car, you should be able to keep them. If your car has been repossessed but not sold, you should be able to get it back after filing and resume regular payments.

Then there is the embarrassment factor. However filing for bankruptcy is a private process. The legal documents are a matter of public record, but that does not mean your information is necessarily being published anywhere. Unless you live in the public eye, it is more likely that the only people who will find out about your situation is your family and the credit card companies.


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