There are a lot of weird “facts” swirling around about bankruptcy today that make it a difficult topic to discuss; the stigma of filing bankruptcy can be a lot to take on, especially if this is the first time you’ve ever considering filing for personal bankruptcy.
With that in mind, here a few points about bankruptcy that should be cleared up ASAP:
- Myth: Not a lot of people file for bankruptcy; it’s mostly all businesses that suffered from the economic meltdown of 2007.
- Truth: Personal bankruptcy cases are actually way more common than you’d think. Back in 1980, business bankruptcy lawsuits accounted for 19% of all bankruptcies; today, they account for just 3%. Thousands of people deal with bankruptcy lawsuits each year.
- Myth: Bankruptcy is always a result of financial mismanagement.
- Truth: The overwhelming majority of bankruptcies result from injuries or accidents that couldn’t have possibly been anticipated and covered financially, even if the individual has a substantial savings. In fact, 62% of all personal bankruptcies are a result of unpaid medical bills.
- Myth: If you have absolutely no available money, filing bankruptcy is your best option.
- Truth: Filing for bankruptcy can actually cost anywhere between $1,500 and $3,000, depending on the court fees and the fees from your lawyer or legal team. If you can’t cover these costs, filing bankruptcy may actually be a bad decision.
- Myth: Your credit is ruined forever once you file for bankruptcy.
- Truth: Your credit score will be hurting for about seven to 10 years, and it will be difficult to take out lines of credit, but it’s still possible. In fact, if you wait a few years until you’re sure that you can manage repayments for a credit card or loan, taking out a line of credit (and making payments on time!) can really help build your credit score up again.
- Myth: You can max out your credit cards before filing for bankruptcy, since you won’t have to pay those debts back.
- Truth: This is actually considered fraud and it’s one of the worst things you can do. The court will be able to see your entire spending history and it’s impossible to cover up a last-minute shopping spree. Also, you’ll have to pay those debts back.
Bankruptcy proceedings can be difficult and confusing, but it’s important to know that you can get through everything and still find financial success again. Helpful info also found here.