People who think about filing for bankruptcy protection are sometimes scared of the legal process. You may fear losing cherished property, being regarded with shame in the eyes of your family or even going to jail. Usually these fears are based on myths — not reality. We’re here today to address the five most commonly held false beliefs about bankruptcy:
- Myth #1: Filing for bankruptcy will ruin my credit for a long time. Filing for bankruptcy may temporarily cause your credit score to drop, but it ultimately improves your credit by wiping out your debt. Chances are that your credit is already damaged due to the amount of debt you accumulated leading you to file. Although a record of your bankruptcy filing remains on your credit report for seven to 10 years, you can begin rebuilding your credit soon after the court discharges your debt. Start by making full and timely payments on any new debts. It is also a good idea to keep your income to debt ratio low and only finance up to 40 percent of your credit limit.
- Myth #2: My friends and co-workers will find out about my bankruptcy. Only the people you tell will know that you filed for bankruptcy. Like most court cases, bankruptcies are public records, but few people actively search public records to find out who they know has filed for bankruptcy.
- Myth #3: It is too hard to file bankruptcy and I probably won’t qualify anyway. The bankruptcy process involves a lot of paperwork and requires you to gather various records, but filing for bankruptcy can actually be a smooth process when an experienced lawyer helps you. It is also imperative you disclose everything to your attorney so he or she can give you with the best advice for your financial situation.
- Myth #4: I won’t own be able to purchase property once I’ve filed a bankruptcy petition. Credit card companies will extend offers to you right after your discharge. Other creditors will only lend to you with at less favorable terms or higher interest rates. Over time you can rebuild your credit and overcome any credit obstacles.
- Myth #5: You can only file for bankruptcy once. There is no limit on the number of times you can file for bankruptcy. However, federal bankruptcy law imposes a waiting period between bankruptcy filings before you can receive a discharge. For example, you must wait eight years before you can receive a second discharge from Chapter 7 and two years between Chapter 13 filings. Other waiting periods apply if you mix chapter filings.
Don’t let your fears prevent you from getting the help you need to get out of debt. Get the facts from a qualified and experienced bankruptcy lawyer.