People have false notions regarding consumer bankruptcy, the process and its aftermath. Before making your decision, familiarize yourself with some facts. The truth about bankruptcy may be very different from what you have previously heard or believed.
Fallacies exist about people who file for bankruptcy, too. In many cases, they are not carelessly spending beyond their means. Getting divorced, incurring enormous medical expenses and unexpectedly losing a job can trigger financial turmoil for upstanding, conscientious individuals.
Untruths about bankruptcy vs. reality
Some of the falsehoods surrounding bankruptcy have been around for so long that it’s tough to dispel them. Nevertheless, you need to know what’s accurate and what isn’t. Here are three of the biggest misconceptions:
- You can lavish money on extravagant items expecting bankruptcy to take care of the bill – Doing that is a path to what’s known as presumptive fraud. According to U.S. News & World Report, you shouldn’t be “spending $725 or more on luxury goods or services within 90 days of filing for bankruptcy or taking a cash advance of $1,000 or more on a single credit card within 70 days of filing.”
- Your credit gets permanently wrecked by bankruptcy – Your credit score will rebound gradually. One way to start repairing it is to obtain a secured credit card and use it for small purchases that you can immediately pay off. Bankruptcy has staying power on a credit report, however, for up to a decade.
- Bankruptcy fixes everything and wipes the slate clean – There are some types of financial obligations that won’t disappear just because you declare bankruptcy. They include student loan obligations, alimony, monetary penalties imposed for criminal wrongdoing and child support.
You want to do the right thing and address your financial issues responsibly. Learn more about how bankruptcy applies to your particular situation before making the leap.