Common Myths About Bankruptcy

Hundreds of thousands of people benefit from bankruptcy cases in the United States on an annual basis. Still, many people have misconceptions about this legal process that can be confusing or off-putting for some who might be considering bankruptcy as a debt-relief solution. It is important that you do not simply rely on public opinion when it comes to bankruptcy, as you could avoid seeking the financial help you truly need as a result.

If you are wondering about the bankruptcy process, you should consult directly with a Northwest Indiana bankruptcy attorney. The following are only some of the many common myths that often circulate about bankruptcy.

You will end up with nothing.

The most common type of bankruptcy is Chapter 7, which eliminates many debts and can leave you with a relatively clean financial slate. However, many people believe that Chapter 7 will also wipe out everything you own, as well. 

It is true that Chapter 7 is often called liquidation bankruptcy because the bankruptcy trustee can take certain property and assets in exchange for the discharge of your debts. This does not mean that Chapter 7 will literally bankrupt you and leave you with nothing. Instead, there are numerous exemptions you can apply to protect much – if not all – of your property. In fact, many Chapter 7 filers do not give up anything in the process. If Chapter 7 took everything filers owned, no one would choose to pursue this type of case. The right bankruptcy lawyer can help you apply exemptions in a manner that will allow you to keep as much as possible.

Filing for bankruptcy means you failed financially, or you are taking advantage of the legal system.

People who do not understand bankruptcy or who never needed it might assume that anyone who files for bankruptcy simply wants to wipe out the results of irresponsible spending and luxury. In reality, most bankruptcy cases do not arise from irresponsible decisions, but instead, from circumstances beyond a person’s control. Some common reasons for bankruptcy that have nothing to do with breaking the budget each month include:

• Medical debt
• Businesses going under
• Unemployment or reduction of income
• Emergency expenses
• Natural disasters

None of the above reflect on a person’s spending choices, and bankruptcy can be the most responsible decision to make in these situations. 

Bankruptcy ruins your financial future.

When you obtain a bankruptcy discharge, it will certainly go on your credit report and remain for years. For a period of time, some creditors might be deterred by the bankruptcy, though this does not mean you are forever financially ruined. Sometimes, bankruptcy can be the smart choice, as it is better than having defaults, foreclosures, repossessions, and other negative marks continually added for years on end. Soon after bankruptcy, it is very possible to start rebuilding credit, and many people obtain mortgages and other loans. 

A Northwest Indiana Bankruptcy Lawyer Can Help

Whitten & Whitten sees the benefits of bankruptcy each and every day for our clients. If you want to learn more, contact us today for a free consultation.