Debunking popular bankruptcy myths

| Jan 22, 2021 | Firm News |

One of the biggest misconceptions when it comes to filing for bankruptcy is that the filer is financially irresponsible. Long Island residents may hesitate from filing because they don’t want to appear as if they cannot resist the temptation to use their credit cards or engage in frivolous spending.

However, this is not usually the case: there are many reasons someone might need to file for bankruptcy, including medical bills and divorce proceedings. Below are two more myths that revolve around bankruptcy and prevent individuals from taking a step that can help them regain control of their financial life:

All debts are discharged through bankruptcy

While bankruptcy does present a fresh start, not all debts are discharged through it. Chapter 7 bankruptcy proceedings wipe out most of them, but domestic support obligations such as alimony and child support are not covered by it. generally, unless a hardship is demonstrated, student loan debts are also not wiped out. Depending on the situation, tax debts may or not be discharged.

Credit can never be rebuilt after bankruptcy

There is no doubt about it—bankrutpcy does affect credit reports. However, paying only the minimum amount due on credit cards or missing payments altogether was also negatively affecting credit reports. Generally, filing for bankruptcy and getting hit once, can put people in a better position credit wise in the long run. In fact, credit can start improving pretty soon, within a few years of a bankruptcy.

Though bankruptcy can provide a fresh start to those who are struggling financially, it is important to understand which type applies best to one’s situation and how to bounce back effectively. Consulting an experienced attorney to discuss one’s options can be one way to ensure the right steps are taken towards financial stability.