Bankruptcy is a loaded topic. Many people have strong opinions about what it is and whether it’s even ethical. But since they may be missing important information about bankruptcy, lots of struggling consumers believe lies that keep them from enjoying the incredible benefits – we can call it financial magic – that a Chapter 7 or Chapter 13 filing can unlock.
Being in debt feels horrible, especially when the debt comes from something beyond your control, like an income loss, an illness or a divorce. Are you letting any of these lies hold you back from getting the debt relief you want?
Get your facts straight
The truth will set you free. Learn the facts about Chapter 7 and Chapter 13 bankruptcy and avoid these fallacies:
1) Bankruptcy will destroy my credit for 7 years (or is it 10?). This is a very common lie. Yes, a bankruptcy filing will “stay on your credit” for years, but it will never keep your credit scores low for 7-10 years by itself. And your credit scores are the most important part of you “getting” credit.
2) I won’t be able to buy a home or get a mortgage. Of course your credit scores will be low for a period of time after you file, but in general they will steadily rise as you keep paying all your bills on time. Some consumers are able to qualify for good mortgages within as little as two years after a bankruptcy filing. This is especially true of FHA mortgages, which usually have more lenient credit requirements than conventional loans.
3) Everyone will think less of me. Debt can be a very embarrassing, guilt-provoking thing. It can make us feel like we’re irresponsible, immature or out of control. As we’ve said before, if your friends look down on you for using federal law to get out of intractable debt, it may be time to find some new friends.
4) If I declare bankruptcy, I am a failure, a quitter. Like virtually nothing else, excessive debt can make you feel weak and powerless. If you believe bankruptcy means failure, do yourself a favor and research the multitude of famous, highly successful people who have filed for bankruptcy. Their stories are easy to find and fun to read.
5) I know I need it, but I can’t afford bankruptcy. If you are struggling with debt, the last thing you want is another expense – that’s true. But continuing to make big debt payments is probably a much more expensive undertaking than a bankruptcy filing that could save you many thousands of dollars within months. Most bankruptcy attorneys offer payment plans and other ways for filers to cover their fees.
Get help with your situation
Certain bankruptcy truths are universal, but your debt profile is unique. Talk to a professional if you need specific answers to your financial questions.