Bankruptcy represents a last resort when it comes to financial issues, but there’s nothing wrong with making that choice if your circumstances warrant it. Hundreds of thousands of Americans file for bankruptcy every year, many of them located in Maryland.
Despite how common bankruptcy is, most people have a limited or imperfect understanding of it, and many misconceptions and myths are out there. Clearing up some of those myths will give you a better sense of whether bankruptcy might be a viable option for you.
Myths about the impact of bankruptcy
One of the most prevalent myths about bankruptcy is that it destroys your credit permanently. First of all, bankruptcy remains on your credit report for only seven to 10 years. And even in the immediate aftermath of bankruptcy, you’ll still be able to secure credit albeit in a more restricted form.
However, be aware that not all forms of debt can be discharged by bankruptcy. While most debts like medical debt, credit card debt, personal loans and back rent can be discharged, you cannot use bankruptcy to discharge child or spousal support, tax debts or student loans.
Myths about assets and bankruptcy
Another common myth is that bankruptcy will leave you with no property or assets of any kind. As a general rule, your home, automobile and basic personal effects will always be safe in a bankruptcy filing.
In fact, even some so-called luxury items may not be of any value to your creditors. Items like televisions and many personal digital devices have little resale value. On the other hand, any luxury item is theoretically fair game to your creditors as long as it’s fully paid off. If you expect to go into bankruptcy with costly luxury items and lose nothing, you’ll likely be disappointed.
Bankruptcy is often poorly understood with multiple myths and misconceptions surrounding it. Educating yourself about the reality of bankruptcy gives you the ability to make a more informed decision about it.