Discover the Truth: Facts About Bankruptcy

May 15, 2024

People file bankruptcy for all sorts of reasons. However, many stop short of filing due to misconceptions about the process. In this article we’ll debunk some of the most common bankruptcy myths and highlight real interesting facts about bankruptcy. By the time you’re finished reading you should have more clarity and a better understanding before making this significant financial decision in your life.
If you’re considering Chapter 7 or Chapter 13 bankruptcy but aren’t sure if it’s right for you, we’re here to help. Contact us today to speak with a top rated bankruptcy lawyer in Florida about the details of your case.

Common Bankruptcy Myths Debunked

Myth 1: Bankruptcy Ruins Your Credit Forever

One of the most common myths about bankruptcy is that declaring bankruptcy will ruin your credit score forever. While bankruptcy does initially impact your credit, it’s not a permanent stain on your financial record. Rather, bankruptcy stays on your credit report for 7 to 10 years, depending on the type.

However, there’s light at the end of the tunnel. You can start rebuilding your credit shortly after discharge. With disciplined financial habits, you can progressively improve your credit scores. Unfortunately, this myth stops many would-be filers from taking advantage of the relief and restructuring opportunities that bankruptcy can provide.

Myth 2: You Will Lose Everything You Own

If you’re thinking about bankruptcy, you may hesitate due to the fear of losing all of your possessions. However, this isn’t a “bankruptcy fact” you can trust. That’s because there are federal and state exemptions under bankruptcy laws that protect many of your most precious assets. These exemptions can include the following assets, but aren’t limited to:

  • Your home
  • Your car
  • Personal belongings (up to certain values)

Therefore, the notion that bankruptcy strips you of everything is far from true. Understanding these exemptions can significantly alleviate the fears associated with the bankruptcy process.

Myth 3: Filing for Bankruptcy Is a Personal Failure

There are hundreds of thousands of bankruptcies filed every year in the U.S. As such, it’s important to note that filing for bankruptcy isn’t a personal failure. A quick search on facts about bankruptcies can reveal that many people use this legal tool due to unforeseen circumstances like:

  • Medical emergencies
  • Divorce
  • Sudden job loss

It’s important to remember that bankruptcy is designed as a safety net, not a mark of failure, providing a chance for financial rebirth.

Myth 4: All Debts Are Wiped Clean in Bankruptcy

It’s certainly true that bankruptcy can discharge many of your debts. However, not all debts are erasable. For the most part, financial obligations like student loans, alimony and child support generally survive the bankruptcy process. It’s important to understand the types of debts affected by bankruptcy so you and your attorney can set realistic expectations before filing. Otherwise, you may be in for a big surprise.

Understanding the Truth About Bankruptcy

Truth 1: Bankruptcy Can Provide a Fresh Financial Start

One of the fundamental bankruptcy facts is its ability to offer you a fresh beginning. That’s because filing for bankruptcy can halt creditor harassment, discharge eligible debts and restructure finances in a way that aligns with your current financial situation. This new start allows you to rebuild your financial foundation without the overwhelming burden of insurmountable debts.

Truth 2: Different Types of Bankruptcy Suit Different Situations

Bankruptcy facts and bankruptcy myths often get entangled when discussing different Chapters of bankruptcy. Chapter 7, known for asset liquidation, and Chapter 13, focusing on debt reorganization, cater to distinct financial situations. Each type has its specific processes and outcomes, underlining the need for personalized financial assessment before choosing a bankruptcy path.

Truth 3: The Bankruptcy Process Is Not as Overwhelming as It Seems

Federal and state bankruptcy laws and procedures aren’t simple. However, with the right legal assistance, it can be a highly structured and easily manageable situation. An experienced bankruptcy attorney in Florida can:

  • Help you navigate the filing process.
  • Represent you in required meetings.
  • Assist you in fulfilling the plan’s obligations.
  • Present debt relief alternatives in lieu of bankruptcy when necessary.

Preparing for Bankruptcy: Steps to Take

If you’re thinking about filing for bankruptcy, then you’ll need to be prepared. While every filing is different, here are a few general steps most filers must take before moving forward in the process:

  1. Gather all of your financial documents, including tax returns, pay stubs, bank statements, loan documents and any other records of debt.
  2. Assess your assets and debts accurately (i.e., medical expenses, credit card bills, properties, valuables, etc.).
  3. Seek credit counseling from a government-approved agency before filing. This mandatory step can provide both education and reassurance that bankruptcy is right for you.
  4. Understand the state and federal exemptions you’re entitled to.
  5. Consider other methods of debt relief, like debt consolidation, loan modifications or negotiating with creditors.

Depending on your circumstances, bankruptcy might not be the best option for you. Consulting with an attorney can help ensure you’re doing what’s right for your current and future financial outlook.

The Role of a Bankruptcy Attorney

The role of a bankruptcy attorney is multifaceted and absolutely vital in navigating the ins and outs of bankruptcy law. When you work with our attorneys, we’ll help you:

  • Determine which bankruptcy Chapter is best for you (i.e., Chapter 7 vs. Chapter 13).
  • Prepare and file accurate and highly detailed documentation.
  • Prepare for and represent you in your 341 meeting of creditors.
  • Navigate the complexities of post-filing issues.
  • Handle disputes that arise during your case.
  • Create a plan to rebuild your credit post-filing.
  • Ensure your rights are protected.

Working with a qualified bankruptcy attorney in the Tampa Bay area is more than just hiring a legal expert – It’s about having an experienced guide to lead you through one of the most challenging financial times in your life.

Contact The Attorney Debt Fighters

Are you thinking about filing for bankruptcy, but not sure where to start? Contact the Attorney Debt Fighters today to discuss the details of your case. Our experienced debt relief attorneys are skilled, compassionate and focused on obtaining the best possible outcome for you and your family.
From debunking common bankruptcy myths to submitting flawless paperwork, we’re here to help you every step of the journey. Contact us today for your free initial consultation.

author avatar
Aleksey Lyabikhov

Share this Article

About the Author