5 bankruptcy myths you should know about

If your financial woes have led you to consider filing for bankruptcy, your mind is probably filled with questions. Bankruptcy may seem a desperate and depressing option at this point, but perhaps you simply do not know enough about it.

You might begin educating yourself by looking at a few basic facts. Here are five common misconceptions about the bankruptcy process.

1. Only financially irresponsible people file for bankruptcy

No. There are many reasons to consider bankruptcy, it is not simply a matter of overspending. While there will always be some sort of financial abuse involved, the top three drivers are loss of employment, divorce or serious illness that results in high medical bills.

2. Filing for bankruptcy will ruin your credit

Despite what you may have heard, you will probably see credit card offers in your mailbox within weeks of the bankruptcy becoming final. You may want to consider getting a secured credit card that requires a bank deposit. Making regular monthly payments will help you begin to rebuild your credit.

3. Bankruptcy will discharge all your past debts

While bankruptcy will give you a fresh start financially, you will still be responsible for certain ongoing debts, such as making alimony or child support payments. Student loans usually must be repaid as well, unless you can prove a hardship, such as disability.

4. You will have to lose your home

In 2015, Alabama exemption statutes were modified with the intent of protecting debtors’ property, especially in the case of low-income residents. An attorney will tell you that it is unlikely you will lose your home due to bankruptcy.

5. A final spending spree will not count in bankruptcy

Yes, it will. If you purchase a beautiful new SUV just prior to the start of bankruptcy proceedings, or indulge in a wild, last-minute shopping spree, you are engaging in activities the court will consider fraudulent. None of these debts will go away in a bankruptcy proceeding; they will all count.

Food for thought

When you sort through the misconceptions and approach the matter logically, you may find that bankruptcy is an option that may not be so bad after all. Do not hesitate to reach out for legal advice in order to make a more informed decision.